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Following figures relate to Rajkot Mills Ltd. For the year 2019: Fixed factory overhead 400,000, fixed Selling and Distribution Overhead 200,000, variable cost per unit 12, selling price per unit 20. Calculate:
Asked by Khushi Last Modified
Answer
Abhinav Kumar Jain
ACT and SAT tutor with Economics undergraduate degree and one year of experience teaching the ACT.
1. Break-even point is when the total cost = total revenue. Let x be the number of units manufactured.
200,000 + 400,000 + 12x (which is the total variable cost of x units) = 20x (which is the total revenue)
This gives us x = 600,000/8 = 75,000 units.
2. Net income of 5,000 per month means the income of 60,000 in the year. Since net income is revenue minus cost, this means 20x - 12x - 600,000 = 60,000, where x is number of units sold.
This gives us x = 660,000/8 = 82,500 units.
3. A net income of 25% on cost means a net income of 0.25( 600,000 + 12x) = 150,000 + 3x
Similar to the previous question, we now get the equation
20x - 12x - 600,000 = 150,000 + 3x, which gives us
5x = 750,000 or x = 150,000 units
4. Let the selling price per unit be y. If 15,000 units bring down the breakeven point (i.e. x), it will be 60,000 units. Substituting that in the equation for breakeven point will give us
600,000 + 12(60,000) = 60,000y
Therefore, y = 22.
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