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Calculate the breakeven point in units and sales amount

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Reference no: EM133254235

Digi Tools Pty Ltd plans to launch a new type of gadget. The company provided the following information:

Selling price

$540

Direct materials 

$130

Direct labour

$190

Variable overhead

$60

Fixed Costs

$3,200,000

Estimated sales

50,000 units

Production capacity

65,000 units

Required (show your calculations):

  1. Calculate the breakeven point in units and sales amount.
  2. Calculate the expected profit from the estimated sales.
  3. If the company required a profit of $7,680,000 what level of units would be required
  4. Should the company adopt the strategy for part iii above. Why or why not?
  5. A big chain electronic retail, GB-Hi Five Ltd, has offered to purchase 5,000 units of the gadget from Digi Tools for $460. To meet the packaging and delivery requirements of GB-Hi Five, the variable cost of the gadget would increase by $30 per unit. Fixed costs would not change. Should Digi Tools accept the offer from GB-Hi Five?  Justify your answer.

Digi Tools new CEO is a scientist with limited accounting knowledge. She wants to know what the difference/s between variable costs and fixed costs is/are. Briefly explain to her the difference including an example for each type of costs for a company like Digi Tools.

Reference no: EM133254235

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