The first question:
A store that sells t-shirts. The average selling price is 15 riyals, the
average variable cost (cost price) is 9 riyals, and the total fixed costs
are 100,000 riyals. A. Determine the size of the break even point in value and the size of the break-even point in units?
B. If the owner wants a profit of 25,000 riyals, how many shirts are required to be sold to achieve this?
C. If fixed costs rise to 110,000 riyals, the break-even point in units will be?
D. If the selling price rises to 16 riyals, will the break-even point size decrease and why? second question: Khaled‘s company manufactures and sells a single product. The company‘s sales and expenses for the last month were:
Rate unit cost total (in riyals) 100% 25 500,000 the sales 40% 10
200,000
60%
15th
300,000
contribution margin
270000
(–) Fixed costs
30000
net income
Required:
A. Calculate the break-even point
in terms and units:
• Using the equation method
• Use the contribution margin
method
B. What is the contribution margin and the contribution margin percentage at the break-even point?
C. How many units must be sold each month to earn the minimum target net income of 60,000 riyals?
D. Calculate the break-even point ratio?
E. Calculate the company‘s safety margin in value and percentage?
F. What is the company‘s contribution margin if the monthly sales increase by 25,000 riyals and there is no change in the fixed costs?
G. If the company is able to reduce the variable cost per unit by one riyal per unit, what is the new monthly break-even point?
H. Calculate the degree of operating leverage If sales increase by 10%, how much will net income increase?
