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ABC Company manufactures and sells 80 units of product “Milk chocolate” at Rs. 150 per unit. Following costs
are incurred to manufacture the product.

 Particulars Rs (per unit) Direct material 20 Direct labor 15 Variable factory overhead 25

Requirement:
1. Calculate the contribution margin per unit. Marks 2
2. Calculate breakeven sales in terms of units. Marks 3
3. Prepare an income statement by considering the new effects i.e., decrease in sales price by 10% and increase in sales
volume by 5%. Fixed costs of Rs. 3,060 incurred on this operation.
Marks 5

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MGT402 Assignment 2 Fall 2020 Solution idea:

1. Calculate the contribution margin per unit.

Contribution margin par unit = Sales less variable costs of sales

Contribution margin par unit = 80-(20+15+25)

Contribution margin par unit =20

2. Calculate breakeven sales in terms of units

breakeven sales in terms of units = FC/Contribution margin per unit

breakeven sales in terms of units = 3660/20

breakeven sales in terms of units = 153

## decrease in sales price by 10% and increase in sales volume by 5%

 TOTAL 11340 SALE (80+(80*5/100)84 5040 LESS VARIABLE COST (20+15+25)*84 5040 CONTRIBUTION 6300 FIXED COST 3060 NET PROFIT 3240 PER UNIT 150-(150*10/100)135

MGT402_Assignment_No_02_Solution_Fall_2020

MGT402_Assignment_No_02_Solution_Fall_2020

Contribution margin per unit= 150-20-15-25=R s.90

Breakeven sales in terms of units= 3060/90=34

Income statement

Sales (135*84)       =R s.11340

variable cost(60*84)=R s.5040

contribution margin=R s.6300

Fixed cost            =R s.3060

Net Profit             =R s.3240

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