The following data have been obtained from the records of a company:
Fixed Costs
Shs. 30,000
Variable Costs
Shs. 1 per unit
Selling Price
Shs. 1.75 per unit
The management has set a goal of earning a profit of Shs. 30,000. In order to achieve the planned profit, the following strategies are proposes.
i) Reduction in fixed costs from Shs. 30,000 to Shs. 0.75.
ii) Increase in selling price from Shs. 1.75 to Shs. 2.20
Required:
What will be the Break-Even point of the company under each of these strategies and how much it should produce in order to earn its planned profit of Shs. 30,000
(7 marks)