Reference no: EM132712698
JB Ltd manufactures and sells a single product, electric ovens, for $80 per unit. The variable cost per unit is $60 and total fixed cost is $480,000.
Required (show your workings):
Problem a) Calculate the contribution margin per oven and the contribution margin ratio.
Problem b) Determine the break-even point in units and in dollars, using the contribution margin approach.
Problem c) What profit will JB earn if it sells 32,000 ovens in 2019?
Problem d) Determine the total sales JB Ltd need to make in unit and in dollars to earn a profit of $25,000?
Problem e) JB Ltd changes strategy in 2020. This would increase variable cost by $4 per unit and reduce fixed costs by $80,000 per year. Calculate the units that would need to be sold in 2020 to achieve the same profit as in 2019.
Problem f) Would you recommend the change? Explain
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