Pakshal electric company manufactures a number of electric products. Rechargeable light is one of the Pakshal’s products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. 1. Compute break-even point of the company in dollars and units. 2. According to a research conducted by sales department, a 10% reduction in sales price will result in 25% increase in unit sale. Please comment whether proposal should be accepted or rejected. prepare two income statements in contribution margin format, one using the current price and one using proposed price (10% below the old sales price) and then comment whether proposal should be accepted or rejected.)

Pakshal electric company manufactures a number of electric products. Rechargeable light is one of the Pakshal’s products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. 1. Compute break-even point of the company in dollars and units. 2. According to a research conducted by sales department, a 10% reduction in sales price will result in 25% increase in unit sale. Please comment whether proposal should be accepted or rejected. prepare two income statements in contribution margin format, one using the current price and one using proposed price (10% below the old sales price) and then comment whether proposal should be accepted or rejected.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 2CE

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Pakshal electric company manufactures a number of electric products. Rechargeable light is one of the Pakshal’s products that sells for $180/unit. Total fixed expenses related to rechargeable electric light are $270,000 per month and variable expenses involved in manufacturing this product are $126 per unit. Monthly sales are 8,000 rechargeable lights. Required: 1. Compute break-even point of the company in dollars and units. 2. According to a research conducted by sales department, a 10% reduction in sales price will result in 25% increase in unit sale. Please comment whether proposal should be accepted or rejected. Suggestion: (Dear students , I suggest you to use a sheet and prepare two income statements in contribution margin format, one using the current price and one using proposed price (10% below the old sales price) and then comment whether proposal should be accepted or rejected. 3. Compute the number of rechargeable lights to be sold to earn a net operating income of…
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