Question 4 10 marks A calculator is manufactured by company

Question 4. [10 marks A calculator is manufactured by company X. The cost of design and development is 25,800.0M while the cost of manufacturing each calculator is 0.8 OMR. This manufacturing cost var it increases by 0.1 OMR per calculator per yea month. How much should the selling price of the calculator be if 2 years? R (fixed) ies such that r. The company can manufacture 500 calculators per ow much should the selling price of the calculator be if the company wants to break-even in

Solution

Given, Fixed Cost = 25800 OMR

Variable cost per unit = 0.8 OMR

Number of calculators manufactured in a month = 500

number of calculators manufactured in the each year = 500 * 12 = 6000

Variable cost in the second year = 0.9

So,Total cost in the two years = 25800 + (0.8 * 6000) + (0.9 * 6000)

= 25800 + 4800 + 5400

= 36000

Break Even Point is when Total Revenue =Total Cost

Thus, to touch the Break Even point in two years

Total Revenue = 36000

12000 * Selling price per calculator = 36000

Selling price per calculator = 36000 / 12000

= 3

Thus, the company should fix a selling price of 3 OMR per calculator in order to reach the break even in two years.