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The following information is supplied by Fleming Ltd - Leaving Cert Business - Question 9 - 2022 Question 9
View full question The following information is supplied by Fleming Ltd.
- Forecasted Output (Sales) 75,000 units
- Fixed Costs €55,000
- Selling price per unit €6
- Variable Costs pe... show full transcript
View marking scheme Worked Solution & Example Answer:The following information is supplied by Fleming Ltd - Leaving Cert Business - Question 9 - 2022
Total Revenue at forecasted output Only available for registered users.
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To calculate total revenue, use the formula:
e x t T o t a l R e v e n u e = e x t S e l l i n g P r i c e p e r U n i t i m e s e x t F o r e c a s t e d O u t p u t ext{Total Revenue} = ext{Selling Price per Unit} imes ext{Forecasted Output} e x t T o t a lR e v e n u e = e x t S e ll in g P r i ce p er U ni t im ese x t F orec a s t e d O u tp u t Substituting the values:
e x t T o t a l R e v e n u e = 6 i m e s 75000 = € 450 , 000 ext{Total Revenue} = 6 imes 75000 = €450,000 e x t T o t a lR e v e n u e = 6 im es 75000 = €450 , 000
Total Costs of Production at forecasted output Only available for registered users.
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Total costs consist of fixed costs and variable costs. The formula is:
e x t T o t a l C o s t s = e x t F i x e d C o s t s + e x t V a r i a b l e C o s t s p e r U n i t i m e s e x t F o r e c a s t e d O u t p u t ext{Total Costs} = ext{Fixed Costs} + ext{Variable Costs per Unit} imes ext{Forecasted Output} e x t T o t a lC os t s = e x t F i x e d C os t s + e x t Va r iab l e C os t s p er U ni t im ese x t F orec a s t e d O u tp u t Substituting the values:
e x t T o t a l C o s t s = 55000 + ( 2.50 i m e s 75000 ) = € 242 , 500 ext{Total Costs} = 55000 + (2.50 imes 75000) = €242,500 e x t T o t a lC os t s = 55000 + ( 2.50 im es 75000 ) = €242 , 500
Profit at forecasted output Only available for registered users.
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Profit is calculated by subtracting total costs from total revenue:
e x t P r o f i t = e x t T o t a l R e v e n u e − e x t T o t a l C o s t s ext{Profit} = ext{Total Revenue} - ext{Total Costs} e x t P ro f i t = e x t T o t a lR e v e n u e − e x t T o t a lC os t s Substituting the calculated values:
e x t P r o f i t = € 450 , 000 − € 242 , 500 = € 207 , 500 ext{Profit} = €450,000 - €242,500 = €207,500 e x t P ro f i t = €450 , 000 − €242 , 500 = €207 , 500
Breakeven point (BEP) in units Only available for registered users.
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The breakeven point in units is calculated using the formula:
ext{BEP} = rac{ ext{Fixed Costs}}{ ext{Selling Price per Unit} - ext{Variable Costs per Unit}}
Substituting the values:
ext{BEP} = rac{55000}{6 - 2.50} = 15,714.29 ext{units}
Round to the nearest unit: 15,715 units.
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