Problem: Cost Volume Profit Analysis - ABC Company
The following information pertains to ABC Company, and its product, Product A.Selling price per unit $45.00Direct material cost per kg $2.00Direct labour cost per unit $1.20Variable overhead cost per unit $0.80Material required per unit 2 kgsOther variable expenses per unit $0.60Annual fixed costs:Advertising $15,000Fixed manufacturing 60,000Other fixed expenses 8,000 $83,000
Required:
1. What is the breakeven point in both units and sales dollars?
2. Assume ABC has a target net profit of $240,000 and has a tax rate of 40%. What is the breakeven point in both units and sales dollars?
3. If ABC Company chose to discontinue advertising, and instead pay $3.00 per unit as acommission, what would the breakeven point be, in both units and sales dollars?