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Octa Electronics produces and markets a single product. Presently, the product is manufactured in a plant that relies heavily on direct labour force Last year, the company sold 5,000 units with the following results:
Sales
22,500,000
Less Variable expenses
13, 500, 000
Contribution margin
9,000,000
Less: Fixed expenses
6,300, 000
Net income
2,700,000
Required
A)Compute the break-even point in rupees and the margin of safety.
B)
1)What would be the contribution margin ratio and the break-even point in number of units if variable cost increases by K600 per unit? Also compute the selling price per unit if the company wishes to maintain the contribution margin ratio achieved during the previous year.
2)The company is also considering the acquisition of a new automated plant. This would result in the reduction of variable costs by 50% of the amount computed in (b) above whereas the fixed expenses will increase by 100%. If the new plant is acquired, how many units will have to be sold next year to earn net income of K 3,150,000.
Hi Komali,
Im afraid Im not able to answer this type of question – there have been cases where we have been sent student homework & that is not a service we provide.
Your example is not a CIMA P1 question ( all CIMA questions are in $ – not rupees) also they are 1.5mins per question – so this is way too long.
This forum is more to bring up or clarify a specific query not covered by our CIMA P1 tuition material or to provide us with a question (along with the textbook answer) that you would like further explanation or verification of how it should be solved.
Sorry we cant help on non-CIMA material such as the above
Cath
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