Lewis and Clark Co., a canoe manufacturer has a projected income for the next financial year as follows:
Sales (10,000 units) €6,000,000
Variable Expenses€ 4,500,000
Fixed Expenses€ 450,000
1) Determine the breakeven in units
Step 1: Unit Sales Price = Sales value / units =
Step 2: Variable Cost per unit = Variable expenses / sales units Step 3: Contribution per unit = Unit sales price less variable cost per unit Step 4: Breakeven = Fixed costs / contribution per unit
2) Determine the required sales level to earn an income of €600,000
Fixed costs + target Profit level
Contribution per unit
3) What is the breakeven point if the variable cost increases by 10% Step 1: Contribution per unit = Unit sales price – new variable cost per unit Step 2: Fixed costs / contribution per unit = Break even point
Lannion and Co is engaged in providing and marketing a standard advice service. The following summarised information for November and December is as follows
Sales (units of service )200300
Sales revenue (€)5,0007,500
Operating Profit (€)1,0002,200
There were no price changes during October and November
1) What is the variable unit cost?
Step 1 – calculate the changes in activity, revenue and operating profit between Oct and Nov. (use boxes above)
Step 2 – Calculate the change in
Sales Revenue minus Operating Profit = total variable cost
Step 3 - Variable cost divided by change in sales units = variable cost per unit
2) What are the fixed costs?
Fixed costs = total cost less (Variable cost per unit x no. of units)
3) What is the breakeven point (in units of service) for the business?...