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Dear Mr Moffat
Could you please help me to understand how to solve below question?
E & Co make to products X Y
Selling Price 24 19.20
Material 8.40 9.60
Direct labour 3.60 2.40
Variable overhead 1.44 0.96
Fixed overhead 2.88 2.40Profit per unit 7.68 3.84
Budget production sale
Product x 10.000
Product Y 12500The fixed overhead included in X relate to the opportionment of general overhead only
Y also include a specific fixed overhead of 6000If only products X were to be made, how many unit to need to be sold to achieve a profit of $144.000?
Correct answer 18636
Could you please show the calculation?
Thanks and Regards
Gabbi
Current fixed overheads are (10000 x 2.88) + (12500 x 2.40) = 58,800
If Y is stopped, total fixed overheads fall by 6000 to 52,800
To get a profit of 144,000, contribution needed is 144,000 + 52,800 = 196,800X gives a contribution of 10.56 per unit.
So need to sell 196,800 / 10.56 = 18,636 units
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