Mgt613 GDB No. 2 solution spring 2011

[Xpert]

The CEO of Cannon is considering adding a new line of digital camera, which will require leasing new equipment for a monthly payment of Rs. 80,000. Variable Costs would be Rs. 400 per camera and cameras would be sold for Rs. 4000 only.
1. How many cameras would be sold in order to break even?
2. What would be the profit/loss if the 100 cameras are made and sold in 1 month?
3. How many cameras must be sold to realize a profit of Rs. 50,000?


Solution:


1. QBEP = FC/ ( R-VC)

= 80,000/ (4000-400)
= 80,000/3600
= 22.22

2. For Q = 100 Cameras, the Profit or Loss Will be
P = Q(R-VC)-FC = 100(4000-400)- 80,000 = 100(3600)- 80,000
= 360,000- 80,000 = 280,000/-

3. For P = 50,000
Q = (FC+P)/ ( R-VC)=(80,000+50,000)/(4000-400)
= 130,000/3600 = 36.11