Question 3 CVP Analysis 20 marks Manchester LTD manufactures FIFA computer games. Last year Manchester...
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Question 3 CVP Analysis 20 marks Manchester LTD manufactures FIFA computer games. Last year Manchester sold 5000 games at $500 each. The variable cost of each game was $300, and the firms fixed cost amounted to $500,000 per year. In an attempt to improve its product, the company is considering replacing a component part that has a cost of $100 with a new and improved part costing $150 per unit in the coming year. Required: a) What was Manchester's contribution margin ratio last year? (3 marks) b) What was Manchester's break-even point in number of units last year? (3 marks) c) What will the new break-even point in number of units be if the suggested changes is not made in the coming year, however, fixed cost increase by 10%. (5 marks) d) How many computer games would have had to sell last year to earn a target net profit of $1,000,000? (4 marks) e) If Manchester holds the sales price constant and makes the suggested changes, how many units must be sold in the coming year to earn a target net profit of $1,000,000
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