The 5Z Company is selling pens to the local market. It is planning to maximize sales and profit by analyzing few conditions using the break-even analysis formula. Below is the data provided for you to make the decision:
Fixed cost per annum $70,000
Unit selling Price $20
Unit Variable cost $10
Existing Sales 8,000 units
Relevant range of output 4,000 to 12,000 units
a) What is the output level at which 5Z Company Break even (that is makes neither a profit nor a loss)?
b) How many units must be sold to obtain $30,000 profit?
c) What is the profit that will result from a 10% reduction in variable costs and a $10,000 decrease in fixed costs, assuming that current sales can be maintained?
d) What is the selling price which would have to be charged to show a profit of $40,000 on sales of 8,000 units?
e) What additional sales volume is required to meet $8,000 extra fixed charge from a proposed plant expansion?