Reference no: EM132618757
QMS has invested Rs. 50 million in refurbishing an existing facility to manufacture the new product. One production begins; the company estimates that it will incur fixed costs of Rs. 100 million. The variable cost to produce each device is estimated to be Rs. 12,500 and is expected to remain at that level for the output capacity of the facility. The company expects unit sales of 100,000 units. The company is using cost plus pricing (mark up pricing). QMS wants to earn a 25% markup on sales. QMS would be selling this product to consumers through wholesalers and retailers.
Problem 1: Suppose the whole sale price of QMS is Rs. 17,000 per unit, fixed costs is Rs. 100 million, variable cost is Rs. 12,500 per unit. Find,
(1) Contribution margin per unit
(2) Contribution margin ratio
(3) Break-even point in units (or volume)
(4) Break-even point in rupees
Problem 2: Suppose QMS would like to realize a Rs. 20 million profit in the first year. How many must it sell at Rs. 17,000 price to cover fixed costs and produce this profit? Use the data given in Problem 1.
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