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Breakeven analysis

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Breakeven analysis

  • This topic has 1 reply, 2 voices, and was last updated 9 months ago by John Moffat.
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  • Author
    Posts
  • April 30, 2022 at 1:09 am #654624
    komalimad22
    Member
    • Topics: 7
    • Replies: 2
    • ☆

    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.

    April 30, 2022 at 10:44 am #654647
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    Please do not simply type out a full question and expect to be provided with a full answer.

    You must have an answer in the same book in which you found the question, so ask about whatever it is in the answer that you are not clear about and I will explain.

    Everything needed to be able to answer this question is explained in our free lectures. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.

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