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Homework answers / question archive / Company sells 400 computer hard-disks which cost data is as follows: Per Unit Selling Price $250 Variable costs $150 Fixed costs are $35,000 per month
Company sells 400 computer hard-disks which cost data is as follows:
Per Unit
Selling Price $250
Variable costs $150
Fixed costs are $35,000 per month.
Required
|
(a) |
What is Hi-tech Company’s expected contribution per unit? |
(2 marks) |
|
(b) |
Calculate the breakeven sales for Hi-tech Company in $ value and in units per month. |
(4 marks) |
|
(c) |
Recently, new competitors have entered the market of digital products. The sales manager proposes that the selling price of hard-disks will be reduced to $235 as to maintain its existing sales volume per month. Discuss how the sales manager’s proposal affects the margin of safety performance. |
(10 marks) |
|
(d) |
The sales manager would like to pay the salesman on commission basis of $15 per disk sold, rather than on fixed salaries of $6,000 per month. The sales manager is confident that the change will increase sales volume by 15%. Should change be made? |
(14 marks) |
|
|
In the given proposal margin of safety sales declined below breakeven sales level. Resulting in Loss of $1,020. Proposal should not be accepted. Rather Efforts should be made to maintain the selling price/sales level or reduce the variable cost.
|
Change should be made due to incremental profit of $5,100.
Any corrections or queries may be asked for by the students via comments.
I will put my best effort to help resolve the issue.
Thanks.
Nancy Garg.
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