COMAB CALCULATIONS

Guide-

Fixed costs –green

Variable costs – red

Gross profit- blue

Marginal Profit- dark green

Selling price- purple

Cost price- grey

Mark up- light grey

Marginal Cost Ratio- Teal

Break-even/ changes- Dark blue

Marginal Safety ratio- pink

Question 1

At 100% capacity utilisation, 25 000 units will be produced. At 75% utilisation, the fixed cost per unit
is R3.50.
Required:
Calculate the total fixed costs and the fixed costs per unit at the following capacity utilisation levels
(if needed, round to the closest cent):

(a) 90%
(b) 55%
(c) 80%

Formulae:

1st step – Given utulisation x units that will be produced = x

Total fixed cost

Solution 1:

(a) 75% × 25 000 = 18 750 units

Total fixed cost = 18 750 × 3.50 = 65 625

90% x 25 000 units = 22 500 units

65 625

22 500 units = R2.92 per unit

(b) Total fixed cost = 65 625

55% × 25 000 units = 13 750 units

65 625

13 750 units = R4.77 per unit

(c) Total fixed cost = 65 625

80% × 25 000 units = 20 000 units

65 625

20 000 units = R3.28 per unit

Question 2

The total variable costs at a capacity utilisation of 70% amount to R130 200. At 75% capacity
utilisation, the factory can produce 30 000 units.

Required:

Calculate the total variable cost and the variable cost per unit at a capacity utilisation of:

(a) 45%

(b) 85%

(c) 100%

Question 3

The following information was extracted from ABC Manufacturers for the last four months:

Month Number of Maintenance

units costs
produced

1 12 000 R30 400

2 9 500 R24 900

3 11 400 R29 080

4 14 200 R35 240

Required:

Calculate the variable cost per unit and the total fixed cost for months 3 and 4.

Question 4

You have received the following information for Acto Manufacturers, relating to the manufacturing
of calculators:
Production at full capacity 50 000 units

Budgeted production and sales 40 000 units

Budgeted information per calculator (at full capacity):

(R)

Direct materials 35

Direct labour 16

Fixed manufacturing overheads 10

Variable manufacturing overheads 6

Fixed selling and administrative expenses 5

Variable selling and administrative expenses 8

Selling price per calculator 125

Required:

Calculate per unit and the total:

· Prime costs

· Marginal costs

· Marginal income

· Profit

Question 5

The cost price of a product is R200. The mark-up is 25%.

Required:

Calculate the selling price, profit, and gross profit percentage.

Question 6

The selling price of a product is R360. The mark-up is 20%.

Required:

Calculate the cost price, profit, and gross profit percentage.

Question 7
The selling price of a product is R500. The gross profit percentage is 10%.

Required:

Calculate the cost price, profit and mark-up percentage.

Question 8

The cost price of a product is R200. The gross profit percentage is 33.3%.

Required:

Calculate the selling price, profit, and mark-up percentage.

Question 9

Marginal income ratio 40%

Total sales R522 500

Total fixed costs R120 000

Number of units produced and sold 110 000

Required:

Calculate:

(a) Marginal income

(b) Variable costs per unit

(c) Marginal cost ratio

(d) Profit

Question 10

Marginal income ratio 40%

Total sales R522 500

Total fixed costs R120 000

Number of units produced and sold 110 000

Required:

Calculate:
(a) The break-even point in units

(b) The break-even point in sales value

(c) The margin of safety ratio

Question 11

ABC Manufacturers produces glue sticks. Their existing plant

has the capacity to produce 10 000 units per month and they
foresee that within the next two years, the demand for their
product will exceed that production. They are investigating the
purchase of a new machine to replace the old machine.

The relevant information for the two machines is as follows:

Existing New

Variable cost per unit R2.50/u R2.00/u

Fixed cost per month R15 000 R20 000

Selling price per unit R5.00/u R5.00/u

Required:

(a) Calculate the break-even point for the existing and new
machines in units.

(b) Calculate the change-over point between the two

options.

Question 12

Alaska Limited manufactures only one type of product. The current monthly budget at full capacity
of 50 000 machine hours is:

Selling price per unit 10.00

Variable costs per unit 2.00

Fixed costs per unit 2.00

Machine hours required per unit: 0.80 hours

Alaska Limited currently sells all units manufactured and has decided, due to demand, to increase
capacity by 40%. This will result in annual fixed costs increasing by R10 000 and variable costs
reducing to R1.50 per unit.

Required:

(a) Calculate the break-even point in units for the current situation.

(b) (i) Calculate the selling price per unit (after the increase in capacity) if Alaska Limited
increases its profit per unit by 1%. Assume that all units are sold.

(ii) Calculate the changeover point where it will be worthwhile for Alaska Limited to increase the
capacity.

(iii) Calculate the break-even point in value (after the increase in capacity) based on the selling
price as calculated in (b) (i) above.

(iv) Calculate the margin of safety ratio after the increase in capacity.

Question 13

Cahama Limited manufactures and sells cans of cooldrink.

The results for the year ended 31 December 2020 are as follows:

Capacity utilisation 80%

Sales 400 000

Costs:

Cooldrink 96 000

Cans 48 000

Direct labour 96 000

Manufacturing overheads (40% 80 000

fixed)

Operating expenses

- Fixed 17 280

- Variable 12 800

Due to various factors, management expects the following changes in costs during the 2021 financial
year:

Cooldrink 11% increase

Cans 5% decrease

Direct labour 15% increase

Manufacturing overheads – fixed R644

decrease

The ratio of variable manufacturing overheads to direct labour will be maintained.

Operating expenses will vary only according to the quantities sold.

No inventory is held.

Required:

(a) Calculate the expected gross and net profit for 2021 if
the selling price increases by 7.5% and the factory
operates at 96% of the total capacity.

(b) Calculate the expected sales and net profit for 2021 if the
number of units sold increases by 10%, and the mark-up
percentage based on cost of sales increases by 3%.

(c) Calculate the break-even sales in value for 2021, based

on alternative (b) above.

(d) Determine the margin of safety ratio for 2021, based on

alternative (b) above.
Question 14

The following information from Hi-tech Inks has been presented to you:

Sales @ R70 per unit R 1 400

000

Marginal income ratio 0.65

The net profit is 23% of the sales

value.

Required:

(a) Calculate the total fixed and variable cost.

(b) Calculate the break-even point in units.

(c) Calculate the margin of safety ratio.

Question 15

The summarised trading results of Jambila Limited for May 2020 are as follows:

Sales (100 000 units × R1 each) 100 000

Expenses (80
000)

Fixed costs (including R10 000 sales 40 000

promotion costs)

Variable costs (including 5% commission on 40 000

sales)
Profit 20 000

Due to increased competition, the directors of the company have decided to increase sales
promotion expenses by 50% and to double the rate of sales commission.

Required:

Calculate the additional units that the company must sell during June 2020 to maintain the existing
profit.

Question 16

Norton CC manufactures puppets. A market share of 30 000 puppets is currently held. Janine, the
only member of the CC, is of the opinion that an effective marketing campaign will increase the
market share in 2021 to 36 000 puppets.

The following information, in respect of 2020, is supplied by Janine:

Selling price per puppet 25

Variable cost per puppet 15

Direct material 4

Direct labour 9

Overheads 2

Fixed costs 127 000

Manufacturing 22 000

Administration 80 000

Selling 25 000

Sales (33⅓ % market share – 30 000 750 000

puppets)

Sales (40% market share – 36 000 885 600

puppets)

Company tax rate 30%

If the market share increases to 40%, the total direct labour cost per puppet will increase by 20%
due to remuneration for overtime, while direct material cost will decrease by 10% due to purchasing
in bulk.

Required:

(a) Calculate the profit after tax for 2020.

(b) Calculate the breakeven sales volume in units for 2020.

(c) Calculate the budgeted profit after tax for 2021, should the aimed
market share of 40% be achieved and an additional amount of R33
000 in respect of fixed cost has to be incurred.

(d) Calculate the breakeven sales value for 2021, based on the
information for a 40% market share.

(e) Calculate the maximum amount which can be spent on the

marketing campaign should 40 000 puppets be sold and a profit of
R75 000 (after tax) be required.