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Hello Sir hope you are doing well.
I went through your video about the above mentioned question.However I’m unable to understand the requirement C of the question. Which asks to calculate the Selling Price per 100 ml for the female version of the product that would ensure further Processing would break even in the test month.
Should it be done. Based upon the Fixed Cost mentioned in the question or some other way.
I saw the examiner answer but unable to understand why they have included 319840 while calculating the Sales Revenue of $ 601.29It is nothing to do with fixed costs.
At the moment they are selling the male version at a price of 399.80 per litres. It they convert is to a female version they will have extra costs and so the selling price will have to be higher, and to break even it will have to be the selling price of the male version plus the extra costs of converting.
They are converting 800 litres of the male version which could currently be cold for 800 x 399.80 = 319840. They will also need 8 litres of hormone at a cost of 96,000 and will have use 700 hours of labour at a costs of 70,000. So the total cost for 808 litres will be 319840 + 96,000 + 70,000 = 485840
This will be minimum price to sell 808 litres, so for it to be worthwhile the price for 100 ml will have to be 485840 / (808 x 100) = 60.13
Sir is it that at this price that would be able to recover the cost of further processing, however overall they would make a profit at this price.
Because the standard perfume price is $ 399.80. Which is more than $ 299.80 per liter
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