In: Finance
QUESTION 4
A local livestock producer utilizes compost waste to develop an organic fertilizer. The fertilizer is prepared for retail sale is fifty pound bags.
Sales price per unit |
RM5 |
Variable cost per unit |
RM2.8 |
Annual fixed costs |
RM60,000 |
Based on the above information, calculate the following.
a) Break-even sales formula:
Now,
Now we can find break-even sales
Break even units:
b) When total units produced and sold is 25 units.
Total sales = 25 * 5 = RM 125
Variable costs = 25 * 2.8 = RM 70
Contribution = 125 - 70 = RM 55
Profit or loss = Contribution - Annual fixed costs
= RM 55 - RM 60000 = -59,945
Therefore, its a loss of -RM 59,945
Particulars | Break even | Quantity 25 |
Units produced and sold | 27,273 | 25 |
Total Sales | 136,364 | 125 |
Less: Variable costs | 76,364 | 70 |
Contribution | 60,000 | 55 |
Less: Annual fixed costs | 60,000 | 60,000 |
Profit or loss | 0.00 | -59945 |