A company manufactures a single product. Budget and standard cost details for next year include:
Selling price per unit $24.00 Variable production cost per unit $8.60 Fixed production costs $650,000 Fixed selling and distribution costs $230,400 Sales commission 5% of selling price Sales 90,000 units Required:
(i) Calculate the break-even point in units. (ii) Calculate the percentage by which the budgeted sales can fall before the company begins to make a loss.
The marketing manager has suggested that the selling price per unit can be increased to $25.00 if the sales commission is increased to 8% of selling price and a further $10,000 is spent on advertising. (iii) Calculate the revised break-even point based on the marketing manager’s suggestion.
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