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The following data have been provided by the finance director of La Pitch which manufactures high-quality tents for the specialist outdoor market. The marketing director wants to reduce the price of the tents to (he considers this to be a psychologically attractive price to consumers) to increase sales volume but there are concerns about reducing unit contribution and covering costs. There are also concerns about exceeding La Pitch's factory capacity.
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direct labour per unit $17
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direct materials per unit
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fixed costs
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current selling price
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maximum capacity of the factory is units
On the basis of La Pitch's financial information construct a fully labelled break-even chart. Calculate the break-even point, the margin of safety and profit from the sale of tents.
Solution
VerifiedIn this question, we will make a break-even chart for La Pitch using the relevant information.
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