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Nixon Limited manufactures and sells a single product. The following data have been extracted from the current year budget.
Selling Price £20/unit
Variable Cost £12/unit
Weekly Profit £22,000
Total weekly fixed cost £10,000
Required:
1. Calculate weekly sales units to generate the profit of £22,000?
2. Calculate break even sales units?
3. Calculate margin of safety?
1. Contribution 20-12=8
Needed to make 22000
Is £10000+ £220000=£32000£32000/8 = 4000 units.
2.£10000/8 = 1250 units
3.margin of safety
Amount of units sales can drop before break even reached is 4000-1250 units= 2750 units.
Alternatively, £22000/8=2750 units.Hope this helps. Not hundred percent sure of these answers, hopefully someone can confirm.
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