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 $39.99\$ 39.99 (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.

  • direct labour per unit $17

  • direct materials per unit$18\$18

  • fixed costs $200000\$ 200000

  • current selling price $45\$ 45

  • maximum capacity of the factory is 3000030000 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 2500025000 tents.


Answered 1 year ago
Answered 1 year ago
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In this question, we will make a break-even chart for La Pitch using the relevant information.

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