Chaudhary Group Ltd manufactures premium high definition televisions. The firm’s fixed costs are $4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. The company sold 5,000 TVs during the previous year. (In the following requirements, ignore income taxes) Required: Treat each of the requirements as independent situations: a) Calculate the break-even point in units.  b) What will the new break-even point be if fixed costs increase by 10 per cent?  c) What was the company’s net profit for the previous year?  d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed?

Cornerstones of Cost Management (Cornerstones Series)
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Author:Don R. Hansen, Maryanne M. Mowen
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Chapter16: Cost-volume-profit Analysis
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Chapter: Cost Volume Profit (CVP) Analysis

Q) Chaudhary Group Ltd manufactures premium high definition televisions. The firm’s fixed costs are $4,000,000 per year. The variable cost of each TV is $2,000, and the TVs are sold for $3,000 each. The company sold 5,000 TVs during the previous year. (In the following requirements, ignore income taxes)

Required:

Treat each of the requirements as independent situations:
a) Calculate the break-even point in units. 
b) What will the new break-even point be if fixed costs increase by 10 per cent? 
c) What was the company’s net profit for the previous year? 
d) The sales manager believes that a reduction in the sales price to $2,500 will result in orders for 1,200 more TVs each year. What will the break-even point be if the price is changed? 

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