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Practice Question_chapter 10

The document outlines various scenarios for breakeven analysis and cost-volume-profit analysis for multiple companies. It includes calculations for contribution per unit, breakeven points, estimated profits, and margin of safety based on provided data for each company. Additionally, it discusses the impact of cost structure changes and selling price increases on profitability.

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5 views3 pages

Practice Question_chapter 10

The document outlines various scenarios for breakeven analysis and cost-volume-profit analysis for multiple companies. It includes calculations for contribution per unit, breakeven points, estimated profits, and margin of safety based on provided data for each company. Additionally, it discusses the impact of cost structure changes and selling price increases on profitability.

Uploaded by

halinhphan05042005
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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TOPIC: BREAKEVEN ANALYSIS / COST VOLUME PROFIT ANALYSIS

Question 1
The BONGWA Company produces a single product called “M”. You have been provided
with the following information:

● Selling price per unit: $50.00

● Variable cost/price per unit: $30.00

● Total fixed costs: $300,000

● Expected sales (units): 40,000 units

● Sales: $2,000,000

● Variable Cost: $1,200,000

Required:
1. Calculate contribution per unit
2. C/S ratio
3. The breakeven point in units/Quantity/Volume
4. Breakeven sales value ($)
5. Also calculate estimated profit
6. Margin of safety in units, value, and percentage.

QUESTION 2

QUESTION 3
ABC Company provides the following data with estimated Sales 20,000 units:

● Selling price per unit: $150

● Variable cost per unit: $110


● Total fixed costs: $600,000

Required:
i) Calculate estimated profit and Contribution to Sales ratio
ii) Break-even point (in units)
iii) Break-even point (in dollars)
iv) Sales quantity required to achieve a target profit of $350,000
& Sales value required to achieve a target profit of $350,000
v) Calculate Margin of safety: units, value, and percentage

QUESTION 4
A Limited Company provides the following data with estimated Sales 20,000 units:

● Selling price per unit: $100

● Variable cost per unit: $90

● Total fixed costs: $500,000

Required:
i) Calculate estimated profit and Contribution to Sales ratio
ii) Break-even point (in units)
iii) Break-even point (in dollars)
iv) Calculate Margin of safety: units, value and percentage

QUESTION 5
Impact of Cost Structure Changes on Profitability
Trinity Tools Ltd manufactures a product that has a variable production cost of £10
and variable selling/distribution costs of £3 per unit. Fixed production and
administrative costs are £60,000 per annum. The sales price per unit is £25, and the
current annual output and sales volume is 7,000 units.
The company is evaluating the option of investing in an automated production line.
This would result in an increase in annual fixed costs by £18,000, but would reduce the
variable production cost to £7 per unit.
Requirementsi
1. Calculate the number of units that must be produced and sold to achieve the same
profit as currently earned, if the automated production line is adopted.
2. Calculate the annual profit with the machine if output and sales remain at 7,000
units per annum.

QUESTION 6
Worked Example: Selling Price Increase with Demand Impact
SweetNest Ltd manufactures and sells a type of dessert cup. The variable cost of
production is £0.40 per unit, and the current selling price is £0.65 per unit.
The company incurs fixed costs of £5,000 per month and currently earns a monthly
profit of £3,250. The monthly sales volume is 33,000 units.
Due to increased branding efforts, the company plans to increase the selling price to
£0.72 per unit. However, market analysis suggests that this price rise may cause a 10%
drop in unit sales volume.
Requirement
Determine whether current profitability can be maintained with the higher selling
price and lower expected sales volume. If not, calculate the additional volume of sales
required to maintain the same monthly profit.

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