Homework Answers
A-
Total sale = Number of unit sold * unit price
10000 * 15.2 = 152000
B-
Total Variable cost =Unit sold × variable cost per unit
10000 × 4.8 = 48000
C-
10000 units sold net profit
Sales - 10000 × 15.2 = 152000
Total variable cost - 10000 × 4.8 = (48000)
Gross profit - 104000
Fixed cost - (24000)
Net profit - 80000
If 11500 units are sold
Sale - 11500 × 15.2 = 174800
Total variable cost- 11500 × 4.8 = (55200)
Gross profit - 119600
Fixed cost - (24000)
Net profit - 95600
Change in net profit =95600 - 80000
= 15600
Fixed cost per unit have decreased as the result of increase in production this because fixed cost stays fixed for relevant range and decreases per unit as production increases
D-
If 10000 is sold
We already know net profit is 80000 if 10000 units are sold from previous question
If 8500 is sold
Total sale - 8500×15.2 = 129200
Total variable cost- 8500×4.8 = (40800)
Gross profit - 88400
Fixed cost - (24000)
Net profit - 64400
Change in net profit = 80000 - 64400
= 15600
Here the fixed cost per unit have increased because there is only 8500 units to allocate $24000
Fixed stays fixed for relavent range as production increases the fixed cost per unit decreases and if production decreases fixed cost per unit increases
E-
Breakeven analysis
Breakeven = Total fixed cost/ contribution margin
CM = 15.2 - 4.8
= 10.4
Break even units = 24000 / 10.4
= 2307.7
If the company could sell 1 unit above breakeven sales of 2308 we should invest in it because every additional unit sold after breakeven sale brings profit to the company
F-
Would you invest in it if sales figure is 70000
Breakeven sales in dollers = Total fixed cost/ CM ratio
CM = 15.2 - 4.8
= 10.4
CM raio = CM / sales price
= 10.4/15.2
= 0.6842
BE Dollers = 24000/ 0.6842
= $ 35077
Yes we should invest in it as the sales figure is greater than breakeven sales
G-
Operating leverage
Operating Leverage = Contribution Margin / Net income
10000 * 10.2 / 80000
102000/80000 =1.275
H-
If Sales increase by 10% net income
10000 + 10% = 11000 units would be sold
| sales | 11000*15.2 | 167200 |
| Variable cost | 11000*4.8 | (52800) |
| Gross profit | 114400 | |
| Fixed cost | (24000) | |
| Net income | 90400 |
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