6. A plant produces 300 units of an equipment a month of...

6. A plant produces 300 units of an equipment a month of P3,600 each. A unit sells for P4.00. The company has 10,000 shares of stock at P200 par value whose annual dividend is 20%. The fixed cost of production is P120,000 a month. (a) What is the break-even point? (b) What is the"unhealthy point"? (c) What is the profit or loss if production is 60% Of capacity? Ans. (a) 100 units/month, (b) 128 units/month (c) P62,667 per month

Transcript

00:01 Hello students, let us solve the problem.

00:03 So, here is a plant production given in the question.

00:06 So, there are information which is given is production 300 units cost per unit is 3600 dollars selling prices selling price per unit.

00:30 It is 4800 and fixed cost is $120 ,000 per month.

00:43 So, this is the information given in the question.

00:46 Let us start doing the solution.

00:48 So, our first step is to calculate contribution margin ratio.

00:54 So, selling price per unit is $4 ,800 and we have to deduct variable cost.

01:05 So, variable cost is 3600.

01:11 So, when we deduct this we get answer as $1200 which we call it as contribution per unit and our pv ratio is contribution per unit divided by selling price per unit contribution per unit divided by selling price per unit.

01:49 So, our contribution per unit is $1200 divided by selling price per unit is 4800 which is given in the question.

02:01 So, our answer will be 0 .25 on 25%.

02:05 So, therefore our contribution marginal ratio is 0 .25.

02:11 Our next step is calculation of break -even point.

02:17 So, the formula to calculate break -even point is fixed cost divided by fixed cost divided by contribution per unit.

02:35 So, our fixed cost is $120 ,000 divided by contribution per unit is 1200 which gives us 100 units per month.

02:51 So, this is in units.

02:57 Next is break -even point in dollars that is equal to again fixed cost divided by pv ratio.

03:14 So, in our previous step, we found the answer for pv ratio our fixed cost is $120 ,000 and pv ratio is 0 .25...

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