. Mr. Mohammed is the Marketing director of Hilti Division in Bin Salim Enterprise in Sultanate of Oman. Presently he is working on a special marketing campaign. He has given a new idea that we should increase the display space and also install new security system. This will increase $25,500 in fixed cost, which is presently $202,500. In addition, Mr. Mohammed is proposing that a 5% decrease in price ($30 to $28.50) will produce a 20% increase in sales volume. Present sales volume is 20,000 units and sales price is $30 per unit. Variable cost will remain at $16.50 per unit. Required: a) Calculate the current break-even point in units and compare it to the break-even point in units if Mr. Mohammed’s idea is accepted.b) Prepare CVP income statement for the current operations and after Mr. Mohammed’s changes are introduced.
. Mr. Mohammed is the Marketing director of Hilti Division in Bin Salim Enterprise in Sultanate of Oman. Presently he is working on a special marketing campaign. He has given a new idea that we should increase the display space and also install new security system. This will increase $25,500 in fixed cost, which is presently $202,500. In addition, Mr. Mohammed is proposing that a 5% decrease in price ($30 to $28.50) will produce a 20% increase in sales volume. Present sales volume is 20,000 units and sales price is $30 per unit. Variable cost will remain at $16.50 per unit. Required: a) Calculate the current break-even point in units and compare it to the break-even point in units if Mr. Mohammed’s idea is accepted.b) Prepare CVP income statement for the current operations and after Mr. Mohammed’s changes are introduced.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
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. Mr. Mohammed is the Marketing director of Hilti Division in Bin Salim Enterprise in Sultanate of Oman. Presently he is working on a special marketing campaign. He has given a new idea that we should increase the display space and also install new security system.
This will increase $25,500 in fixed cost, which is presently $202,500.
In addition, Mr. Mohammed is proposing that a 5% decrease in price ($30 to $28.50) will produce a 20% increase in sales volume.
Present sales volume is 20,000 units and sales price is $30 per unit.
Variable cost will remain at $16.50 per unit.
Required:
a) Calculate the current break-even point in units and compare it to the break-even point in units if Mr. Mohammed’s idea is accepted.
b) Prepare CVP income statement for the current operations and after Mr. Mohammed’s changes are introduced.
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