Question 2: Preparation of break‐even chart with step fixed costs: Tordo GmbH manufactures various products and uses CVP analysis to establish the minimum level of production to ensure profitability....

Question 2:
Preparation of break‐even chart with step fixed costs:
Tordo GmbH manufactures various products and uses CVP analysis to establish
the minimum level of production to ensure profitability.
Fixed costs of 50 000€ have been allocated to a specific product, but are
expected to increase to 100 000€ once production exceeds 30 000 units.
Variable costs per unit are stable at 5€ per unit over all levels of activity.
Revenue from this product will 7,50€ per unit
Required:
a. Formulate the equations for the total cost (or calculate the total cost) at:
i. Less than or equal to 30 000 units
ii. More than 30 000 units (tip: select 30 001 units to illustrate)
b. Prepare a break-even chart and clearly identify the break-even point or
points (this can be hand drawn and not scale – indicative)
c. Briefly discuss the implications of the results from your graph in (b) with
regard to Tordo’s production plans