Reference no: EM133106015

Question - Holly's Homewares makes and sells a single product. Individual product details are as follows:

Selling price $84

Direct materials $30

Direct labour $24

Variable overhead $14

Fixed Costs $320,000

Estimated sales 24,500 units

Production capacity 30,000 units

a) Calculate the contribution margin.

b) Calculate the breakeven point in units.

c) Calculate the expected profit from the estimated sales.

d) If Holly's required a profit of $96 000, what level of sales dollars would be required?

e) Holly's has an offer from a new overseas client to purchase the product for $70. To supply overseas, the variable cost would increase by $6 per unit. Fixed costs would not change. Would it be profitable for Holly's to accept the special order from overseas? Justify your answer.