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Question - Futuristic was a newly setup firm in 2019. It is in the business of providing artwork. However, being in the business of standard art objects (non-essential items), it did not do well once it was hit by COVID-19. It has a selling price of 2,500 per piece and a variable cost of 1,000 per piece. It incurs an annual fixed cost of 30,00,000.
a. The manager of the business wishes to know- the number of art pieces they must sell to be at the break-even point the contribution margin whether the firm is earning a profit or incurring a loss by selling 2,100 art pieces.
b. To combat the current difficult situation, the manager plans to curb the variable expenses and bring them to 500 per piece. Compute the new break-even point and contribution margin. Analyze and explain the movement in contribution margin to the manager.
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