Answer # 2(a)

On the basis of French revised information:

Products Aggregate A B C
New Sales Volume 1750000 400,000 400,000 950,000
Sales Revenue $2,028,000.00 $668,000.00 $600,000.00 $760,000.00
Sales Price 1.33 1.67 1.5 0.8
Variable Cost 0.70 1.25 0.625 0.25
Total Variable 987500 500000 250000 237500
Cost
Fixed Cost 640000 170000 275000 195,000
Profit 400500 -2000 75000 327500

Break Even (units) = FC / SP – VC

= 640,000 / 1.33 - 7.0
= 1,015,873
Break Even (money) = BEP (U) x SP
= 1,015,873 x 1.33
= $1,351,111

Answer # 2(b)

Company must obtain $200,000 as gross profit, in order to give 50% dividend to its investors.
Unit Contribution = SP – VC
= 1.33 – 0.70
= 0.63
Contribution Ratio = (SP – VC) / SP
= (0.63) / 1.33
= 0.47
Sales Volume for Target Profit = (FC+TP)/UC
= (640,000 + 200,000)/0.63
= 1,333,333
Sales Value for Target Profit = (FC+TP)/CR
= (640,000 + 200,000)/0.47
= 1,787,234
Company must sell 1,333,333 units to achieve their target of $200,000 gross profit.

Answer # 2(c)
Company must obtain $150,000 as gross profit if the union demands are taken into the
consideration.
The overall VC cost increases by 10% (0.7) thus VC = 0.77.

Unit Contribution = SP – VC
= 1.33 – 0.77
= 0.56
Contribution Ratio = (SP – VC) / SP
= (0.56) / 1.33
= 0.42
Sales Volume for Target Profit = (FC+TP)/UC
= (640,000 + 150,000)/0.56
= 1,410,714 in units
Sales Value for Target Profit = (FC+TP)/CR
= (640,000 + 150,000)/0.42
= 1,880,952 in dollars

To obtain “$200,000” as gross profit, the company must sell 1,410,714 units of items.
 Answer # 2(d)
Company must obtain $200,000 as gross profit, If the union demands and bonus dividend
conditions are taken into the consideration.
The overall VC cost increases by 10% (0.7) thus VC = 0.77.

Unit Contribution = SP – VC
= 1.33 – 0.77
= 0.56
Contribution Ratio = (SP – VC) / SP
= (0.56) / 1.33
= 0.42
Sales Volume for Target Profit = (FC+TP)/UC
= (640,000 + 200,000)/0.56
= 1,500,000 in units
Sales Value for Target Profit = (FC+TP)/CR
= (640,000 + 200,000)/0.42
= 2,000,000 in dollars

To obtain $200,000 as gross profit, the company must sell 1,500,000 units of items.