The executives of Samson Company are developing the annual profit plan. The effect on budgeted profit of several contemplated decisions is being assessed. Some of these decisions will affect fixed costs, other will affect variable costs and still others relate to sales price and sales volume (number of units). The profit goal set by the management is Ksh 25,000. The following preliminary income statement data (summarized) have been developed as under:
Sales at Ksh 20 per unit
Ksh 100,000
Costs:
Fixed
Ksh 49,600
Variable
Ksh 38,000
Ksh 87,600
Profit
Ksh 12,400
Required: (Each alternative is independent and assume no change in units unless specifically stated otherwise)
a. Compute planned contribution margin, profit and break-even point based on the preliminary plan.
b. Compute the planned contribution margin, profit and break-even point assuming management makes a decision that will cause fixed cost to increase 10 percent.
c. Compute planned contribution margin, profit and break-even point assuming instead that the decision will cause only variable costs to increase 10 percent.
d. Compute planned contribution margin, profit and break-even point assuming a decision made to increase the sales price by 10 percent.
e. Compute planned contribution margin, profit and breakeven point assuming the planned sales volume (units) is increased by 10 percent.
f. There is possibility that all the above alternatives will be included in the final profit plan that is, a 10 percent increase in fixed costs, a 10 percent increase in variable costs, a 10 percent increase in sales price and a 10 percent increase in sales units. Compute the budgeted contribution margin profit and break-even point considering the combined effect of these four changes.
g. How many units would have to be sold under requirement 6 to exactly meet the profit goal?