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  • 05-05-2011 12:54am
    #1
    TokenWhite
    Registered Users, Registered Users 2 Posts: 187 ✭✭


    Not sure whether to put this here or in the student forum but I'm currently revising for my exams next week, going fine until I hit a dead end, cannot for the life of me figure out what to do here. I know it's very basic and that I will be kicking myself when I hear the answer but I've been looking at it for the past hour, trying algebraic equations, ratios etc to get it right but none seem to be working. I'm on holidays at the minute so can't ask anyone at college about, anyway here is the question

    X Ltd manufactures a single component for computer manufacturers. Thecomponent sells for €15 per unit and has a contribution/sales ratio of 60%. Fixed costs are €112,500 per annum.


    a) Calculate the breakeven point both in terms of sales revenue and number of units.

    b) Calculate the level of sales required to achieve a profit of €52,200 per annum expressing your answer in number of units and in sales revenue.

    c) Calculate the level of sales required (in number of units only) to achieve a profit equal to 20% of sales value and prove that your answer is correct.

    Part C is obviously the problem, I have no clue as to how to make sure my revenue is 5 times the profit.


    Thanks for any help


Comments

  • #2
    barneystinson
    Registered Users, Registered Users 2 Posts: 4,685 ✭✭✭barneystinson


    TokenWhite wrote: »

    X Ltd manufactures a single component for computer manufacturers. Thecomponent sells for €15 per unit and has a contribution/sales ratio of 60%. Fixed costs are €112,500 per annum.


    c) Calculate the level of sales required (in number of units only) to achieve a profit equal to 20% of sales value and prove that your answer is correct.

    Part C is obviously the problem, I have no clue as to how to make sure my revenue is 5 times the profit.


    Thanks for any help


    OK I haven't done any of this jazz in years but here goes:

    (Assuming X is your no. of units sold, then €15X is your Revenue)

    (15X x 60%) - 112,500 = (15X x 20%)

    .... 9X - 112,500 = 3X

    .... 9X - 3X = 112,500

    .... 6X = 112,500

    so X = 18,750

    Proof:

    18,750 x €15 = 281,250

    Contribution (60%) = 168,750

    Fixed Costs = (112,500)

    Profit = 56,250

    56,250 / 281,250 = 20%


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