# A company manufactures a single product which has the following cost structure

A company manufactures a single product which has the following cost structure

based on a production budget

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A company manufactures a single product which has the following cost structure
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of 10,000 units.

Materials – 4 kg at \$3/kg \$12

Direct labour – 5 hours at \$7/hour \$35

Variable production overheads are recovered at the rate of \$8 per direct labour

hour.

Other costs incurred by the company are:

\$

The selling and distribution overheads include a variable element due to a

distribution cost of \$2 per unit. The fixed selling price of the unit is \$129.

You are required to;

(a) Calculate how many units have to be sold for the company to breakeven.

(b) Calculate the sales revenue which would give a net profit of \$40,000.

(c) If the company could buy in the units instead of manufacturing them,

calculate how much it would be prepared to pay if both:

(i) estimated sales for next year are 9,500 units at \$129 each; and

would still be incurred even if there is no production (all other fixed

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