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1 Jake sells kites for $15 each
1
Jake sells kites for $15 each. The variable cost of each kite is $11 and the fixed costs of operating the little business is $300 per month. Jake is thinking of paying an extra $2 dollars per kite on an improved material from a relatively unknown overseas supplier and thinks he can then sell the kits for $20, if the fixed cost stay the same ($300 per month), what will the new break even amount of kites be per month (10 marks)?
2
Abdullah deposited an amount of 4000 dinars for a period of 5 years and at a compound interest rate of 6%. Find the total amount?
a. 4000 kd
b. 5352.902 kd
Expert Solution
1
| Calculation of Breakeven Amount: | |||
| Particulars | Amount | ||
| Revised Selling price | $ 20.00 | ||
| Less:Variable cost | $ -11.00 | ||
| Less:Additional Material cost | $ -2.00 | ||
| Contribution per unit | $ 7.00 | ||
| Fixed cost per month | $ 300.00 | ||
| Breakeven sales | |||
| Fixed cost | $ 300.00 | ||
| Selling Price - Variable cost | $ 20.00 - $ 13.00 | ||
| Breakeven sales | 43 | ||
| Breakeven amount | 43 X $ 20 = $ 860.00 | ||
| (Breakeven sales X selling price per unit) |
2
Given:
Principal= (P)= 4000 kd
Time= (t) =5 years
Compound Interest Rate= (r) =6% or 0.06
Formula for compound interest:
Total Amount= P (1+ r)t
Amount= 4000(1+0.06)5
= 4000(1.06)5
= 4000*1.3382255776
= 5352.9023 kd
Correct answer is (b) 5352.902 kd
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