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Company X has estimated their demand levels of their product A
Sales volumes of A (units) | 15000 | 16500 | 18200 | 19000 | 20000 |
Probability | 0.15 | 0.18 | 0.19 | 0.21 | 0.22 |
Selling price per unit is Rs. 8/- with marginal cost = Rs. 4.80/- and fixed cost = Rs. 42000/-
Calculate probability of company’s
a) Break even
b) Makes profit of minimum Rs.20000/-
Solution
The solution is explained below −
a) Break even
Calculated contribution cost
Contribution cost= sales cost – marginal cost
Contribution cost= 8 – 4.80
Contribution cost= 3.20/-
Breakeven point = fixed cost / contribution cost
= 42000/3.20
= 13125 units (app)
Probability of sales more than or equal to 8077 units
Probability of sales = (0.15+0.18+0.22+0.24+0.26) => 0.95 => 95%
b) Makes profit of minimum Rs.20000/-
Total contribution = (fixed cost) + profit => 42000 + 20000 => 62000 - Sales = total contribution / contribution cost => 62000/3.20 => 19375 units - Probability for 19375 units 19375 is near to 20000 units, so we have to take probability of 0.22 with appropriate calculations => (0.22 /20000)*19375 => 21.31%
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