Question

A] If cost is $30/unit what must the minimum price be if the profit margin is 15%? B] Based on the figures in “A” above how many minimum units must have been produced to break even if 180 units were sold of those produced? C]. If the production units found in “B” above increased by 100% would the number of units sold need need to increase by 100% in order to break even if price increased by 50%? If not what would be the percentage change in number of units sold?

Answer 1

(A) Cost price per unit = $30

Profit margin 15% (15% of $30) = $4.50

Selling price per unit ($30+$4.50) = $34.50

Minimum price = $34.50

(B) Number of units sold = 180 units

Total Sales value ($34.50 * 180units) = $6,210

Cost per unit = $30

BEP is a point at which total revenue is equal to total cost

Minimum units must have been produced to break even = $6210 / $30

= 207 units

Note: But as per question number of units sold and number of units produced is not same

(C) If production units found in" B" above increased by 100% (207units + 207 unit) = 414 units

If price increased by 50% i.e. new price ($34.75 + 50 % of $34.75) = $51.75

Total cost = 414 units * $30 = $12,420

Selling price per unit = $51.75

Number of units sold in order to break even if price increased by 50 % = $12,420 / $51.75

= 240 units

Change in number of units sold = 240 units - 180units

= 60 units

% in chnage of number of units sold = 60 / 180 *100

= 33.33%

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