Problem:

The Doral Company Ltd manufactures and sells pens. Recently, 500,000 units are sold per year at Rs.5 per unit. Fixed costs are Rs.900, 000 per year. Variable costs are Rs.3 per unit.

Required 

(a) What is the current annual operating income?

(b) What is the present breakeven point in revenues?

(c) Evaluate the new operating income for each of the following changes:

(i) Variable cost rise by Rs.0.10 per unit

(ii) 10 % rise in fixed cost and 10% rise unit sold

(iii) A 20% reduce in fixed costs, a 20% decrease in selling price, a 10% reduce in variable cost per unit, and a 40% rise in units sold

(d) Compute the new breakeven point in units for each of following changes:

(i) 10% rise in fixed costs

(ii) 10% rise in selling price and Rs.100, 000 rises in fixed costs