Roy ball and nice co ltd.
Roy ball and nice co ltd is a manufacturer of young, playing balls for young children. Each ball sells for $6 per unit, its variable cost per unit is $2 and annual fixed costs are $40,000. The company projects to achieve the following:
a) Break – even –sales – volume
b) $20,000 sales for the whole year.
c) $25,000 if the product price increase by $1 and annual fixed cost increases by $ 10,000.
WORKING / PROJECTIONS.
The expected breakeven sales volume
Fixed costs = Fixed costs
Contribution per unit selling price- variable price per unit
= $40,000 = $40,000 = 10,000 units.
B) Required revenue contribution = fixed costs + profit target
= $40,000 + $20,000 = $ 60,000
So to get the required number of units required to get the profit
Contribution target = $60,000 = 15,000 units.
Contribution per unit $4
D) if the product increases by $1 and the fixed increases by 10,000 and to the targeted profit raises to $ 25,000
$25,000 + $ 40,000+ $ 10,000 = $ 75,000.
So to get the targeted volume for the storage of the expected manufactured goods would be equal to
Contribution target = $75,000 = $75,000 = 15,000 units
Contribution per unit ($7-2) $5
Definition of terms.
Variable cost – a cost that changes in proportion to changes in production volume.
Fixed cost: a cost which a change within a certain output or turn over limits tend to be unaffected by fluctuations volume of output or turnover.
Revenue per unit for the activity is the difference between the selling price and variable cost per unit.
Unit of measure: this is an expression of measure either in dollar or in units of sales.
Larson D, Kermit, Wild, J. john & Chippetta Barbara;(1996); fundamentals of accounting principle; London; Irwin.