I have attached 2 files. One is the question and the second one is the solution. This question has 3 parts to it. A & B has been answered already. I need C worked out. I have attached the solutio
I have attached 2 files. One is the question and the second one is the solution. This question has 3 parts to it. A & B has been answered already. I need C worked out. I have attached the solution to A&B beacause C ties into it. Please show all work so I can get an understanding on how to work the problem on my own..
Greentown Industries sells its transport services at a range of prices to five
different customer groups. The company has fixed costs of £150,000 per year.
The average variable costs for each transport service, irrespective of customer
group, is £7. The Table below shows the prices charged to each customer group
and the quantity of transport services that are currently sold at that price.
If the average selling price is £21, calculate the breakeven point in quantity and money
terms and draw a rough sketch of a cost-volume-profit (CVP) graph that shows the
relationships between the elements of CVP.
Ignoring any market demand or capacity limitations, calculate the optimum selling price
for Greentown Industries and identify which customer group is most profitable.
Use the following information to answer part (c) Assume that the maximum market
demand for each customer group is 20,000 transport services at the same price as
currently charged (see Table above).
Also assume that Greentown’s capacity limitation is 60,000 transport services.
Based on the calculation of optimum selling prices in (b) above but with
the capacity and demand assumptions taken into consideration, calculate
the maximum profits that Greentown can earn and the customer mix and
quantity by which that profit can be achieved.
Less Variable Cost
Contribution per unit
Breakeven point in Quantity
Contribution per unit
10714.2857142857 or 10714
Breakeven point in money
Less Variable expenses
Less Fixed expenses
Therefore the optimal selling price is 23 because the net income is 30,000
is maximum here
Therefore Private Cutomer group is most profitable as the net income is maximum here.
It is not given in the question how to distribute the fixed expenses therefore I am assuming that the fixed
expenses have been distributed equally among all the five customers group.