Question
The alpha company produces and sells digital decoders and for the next six months the management has drawn up the following operating cost budget which
Materials 150,000.00 Personnel 100,000.00 General production costs 80,000.00 General administrative costs 40,000.00
Knowing that all general costs and 40% of labor costs are fixed and that a unit sales price of 150.00 is expected
1) Calculate the break-even turnover and the related safety margin based on the sales forecasts.
2) Calculate what minimum price could be charged for a proposed sale of an additional 500 decoders which would allow saturating production capacity and increasing the initial operating income by 15% based on budget forecasts.
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