Agta Enterprises manufactures a product that sells for R180 each. The company presently produces and sells 50 000 units per year. Unit variable manufacturing and selling expenses are R90 and R18 respectively. Annual fixed costs are R2 200 000 for manufacturing overheads and R1 040 000 for selling and administrative activities. Determine the sales quantity required in order to achieve the company’s profit objective of R1 800 000.

Agta Enterprises manufactures a product that sells for R180 each. The company presently produces and sells 50 000 units per year. Unit variable manufacturing and selling expenses are R90 and R18 respectively. Annual fixed costs are R2 200 000 for manufacturing overheads and R1 040 000 for selling and administrative activities. Determine the sales quantity required in order to achieve the company’s profit objective of R1 800 000.

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 16E

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Agta Enterprises manufactures a product that sells for R180 each. The company presently produces and sells 50 000 units per year. Unit variable manufacturing and selling expenses are R90 and R18 respectively. Annual fixed costs are R2 200 000 for manufacturing overheads and R1 040 000 for selling and administrative activities Suppose the marketing manager proposes that the selling price be increased to R198 per unit. Calculate the amount by which fixed costs must decrease in order to achieve the company’s profit objective of R1 800 000, if 50 000 units are sold.
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