Q1) From the following data, Calculate: (i) Break-even point in units. (ii) What should be the selling price per unit if the break- even point is to be brought down to 4000 units? (iii) How many units must be sold to earn a pro?t of Rs. 10, 000? Direct materials Rs.4 per unit. Direct labour Rs.3 per unit. Variable overheads 100% of direct labour. Selling price R820 per unit. Fixed overheads Rs.50,000

THE CORRECT ANSWER IS AS FOLLOWS:-

Step-by-step explanation

PART - 1)

 

BREAKEVEN POINT IS AS FOLLOWS :-

 

BEP 

= FIXED COST /CONTRIBUTION PER UNIT

 

= RS 50,000/RS 10

 

= 5000 UNITS

 

 

 

 

 

WHERE, CONTRIBUTION PER UNIT IS :-

 

CONTRIBUTION PER UNIT 

= SELL PRICE - (MATERIAL - LABOR - VARIABLE OH[DIRECT LABOR*100%])

 

= RS 20 - (RS 4 - RS 3 - RS 3)

 

 

= RS 10

 

 

 

 

 

PART - 2)

 

 

BREAKEVEN POINT AT 4000 UNITS :-

 

BEP 

= FIXED COST /X PER UNIT (REQUIRED)

 

4000 UNITS = RS 50,000/X PER UNIT

 

X PER UNIT = RS 50,000/4000 UNITS

 

 

X PER UNIT = RS 12.50 PER UNIT

 

 

 

 

HENCE , SELLING PRICE TO BREAKEVEN AT 4000 UNITS IS AS FOLLOWS :-

 

 

SELL PRICE 

= VARIABLE COST + REQUIRED CONTRIBUTION

 

= RS 10 + RS 12.50

 

= RS 22.50

 

 

 

 

PART - 3)

 

STATEMENT SHOWING COMPUTATION OF UNITS TO BE SOLD IS AS FOLLOWS :-

 

UNITS 

= FIXED COST + PROFIT/CONTRIBUTION PER UNIT

 

= RS 50,000 + RS 10,000/10 RS

 

= 6000 UNITS