Reference no: EM132517958

Konta Co makes and sells a single product. The current selling price is Br.16.25 per unit. Variable expenses are Br.9.55 per unit, and fixed expenses total Br.26,750 per month.

Required:

(Unless otherwise stated, consider each requirement separately.)

Question a) Calculate the break-even point, expressed in terms of total sales dollars and sales volume.

Question b) Calculate the monthly operating income (or loss) at a sales volume of 5,550 units per month.

Question c) Calculate monthly operating income (or loss) if a Br.2.50 per unit reduction in selling price results in a volume increase to 8,700 units per month.

Question d) What questions would have to be answered about the cost-volume-profit analysis simplifying assumptions before adopting the price-cut strategy of Part (c)?

Question e) Calculate monthly operating income (or loss) that would result from a Br.1.60 per unit price increase and a Br.6450 per month increase in advertising expenses, both relative to the original data. Assume a sales volume of 5,750 units per month.

Question f) Management is considering a change in the sales force compensation plan. Currently, each of the firm's two salespersons is paid a salary of Br.2,670 per month. Calculate the monthly operating income (or loss) that would result from changing the compensation plan to a salary of Br.450 per month, plus a commission of $0.85 per unit, assuming a sales volume of:

(i) 5,950 units per month.

(ii) 7,100 units per month.

Question g) Assuming that the sales volume of 6 000 units per month achieved in Part (f) could also be achieved by increasing advertising by Br.1,250 per month instead of changing the sales force compensation plan, which strategy would you recommend? Sufficiently explain your response.