Lewis Production Company had the following projected information for 2004: What is the profit when one unit more than the break-even point is sold?

A) £150
B) £60
C) £1,500,150
D) £600,060

Question

Lewis Production Company had the following projected information for 2004: What is the profit when one unit more than the break-even point is sold?

A) £150 
B) £60 
C) £1,500,150 
D) £600,060

Quizplus · Accepted Answer

To find the profit when one unit more than the break-even point is sold, we need to first calculate the break-even point.

Break-even point = Fixed costs / Contribution per unit
= £450,000 / (£30 - £15)
= 30,000 units

The projected sales for the year are 40,000 units, which means that 10,000 units sold above the break-even point.

Total contribution = (Sales - Variable costs) = (£1,200,000 - £600,000) = £600,000
Contribution per unit = Total contribution / Sales = £600,000 / 40,000 = £15

Profit when one unit more than the break-even point is sold = (Contribution per unit * 1) - Fixed costs
= (£15 * 1) - £450,000
= -£435,000

This means that the company would incur a loss of £435,000 if they sold one unit more than the break-even point. Therefore, the best choice is option B - £60, as it is not a valid answer option.

Lewis Production Company Had the Following Projected Information for 2004