Determine breakeven total volume of sales

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Reference no: EM131693856

Question 1. Gafat Engineering Ethio Plc manufactures two types of TV sets - LCD and CRT - both having only one model. The LCD and CRT television sets sell for Br 9,000 and Br5,000, respectively. The company sells its products through its own stores and other outlets. Total fixed expenses are Br15,000,000 per month.

Variable expenses and monthly sales data are given below:

	LCD	CRT
Variable expenses	Br5,000	Br2,000
Monthly sales in units	2,000	3,000

Required: (unless stated figures should be computed for one month)

a) Determine breakeven total volume of sales and sales volume for each product.

b) Determine sales volume and sales revenue for the company to earn Br500,000 profit after 30% profit tax.

c) The company has planned to incur Br 200,000 monthly selling (promotional) expenses to increase sales volume for its LCD TV sets to 4,000. If the plan materializes and other things remain constant, determine breakeven sales volume and sales revenue for the company.

d) The company has planned to buy new and improved technology that reduces variable production expenses for its LCD TV set to Br4,000 while increasing its monthly fixed production costs by Br500,000. If the plan materializes and other things remain constant, determine breakeven sales volume and sales revenue for the company.

e) If the company is guaranteed with total sales volume of 10,000 TV sets in a given month, should it go for option "c" or "d" above given that sales mix remained constant as provided in each of the two options? Why? What if the guaranteed total sales volume of 7,000 instead of 10,000? Why? What should be the guaranteed total sales volume for the two options to provide equal profit to the company?

Reference no: EM131693856

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eta1693856

12/25/2017 6:12:34 AM

gafat engineering ethio plc manufactures two types of TV set -LCD and CRT -both having only one model .the LCD and CRT television sets sell for usd 9,000 and usd 5000 respectively.the company sells its product through its own store and other outlets. total fixed expenses are usd 15,000 per month.variable expense for LCD USD 5,000 and for CRT usd 2,000 and monthly sale in unit for LCD usd 2,000 and for CRT usd 3,000. required .1.break even total volume of sale and sales volume for each product.

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