Question

Majestic Enterprises manufactures microchips for computers. A market survey shows that a 10% reduction in price will result in a 30% increase in sales with variable costs per unit remaining unchanged. On the other hand, an investment of $30,000 in machinery would reduce variable costs by $3 a unit. a) Determine the sales volume and break-even point for each option given Majestic currently sells 10,000 units @ $20 each, has variable costs of $80,000 and fixed costs of $40,000. Ensure you have checked all calculations for accuracy prior to submission. b) Using the current information provided in a) as the budget for month 1 and the additional information below, complete the 12 month budget for Majestic Enterprises. Ensure you have checked all calculations for accuracy prior to submission. Sales expected to rise monthly by 10% Variable costs to increase by 5% per month to the 6th month and then stabilize. Fixed costs to remain stable for the first 9 months then record an increase of $10,000. Admin expenses of $5,000 to be incurred in the first month with a 2% increase per month.

Answer 1