A firm makes a single product with a marginal cost of $3.50 and a selling price of $5.50. Fixed costs are $30 000 per period.
You are required to calculate:
a. The C/S ratio
b. Sales at break-even point
c. Number of units to break even
d. Sales to achieve a profit of $10 000
Question 2
a) Smith Limited has made the following estimates for next month
Selling price $25 per unit
Variable cost $10 per unit
Fixed costs for the month $300 000
Forecast output 30 000 units
Maximum output 40 000 units
You are required to calculate the:
i) contribution margin ratio
ii) break-even point in units
iii) break even points in sales revenue
iv) margin of safety at the forecast output
v) number of units to generate a profit of $100 000
b) List and explain five (5) assumptions of break-even analysis
