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posted by  asalvani on 11/3/2009 1:51:30 AM  |  status: Live  |  Earned Karma: 25

breakeven point, profit statement 08 Q9

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N/A N/A N/A N/A 11/28/2009 at 7:00:00 PM
Question Details:
Question 9
You have been given the following information about product X:
Selling price per unit £20.00
Direct materials per unit £3.00
Direct labour per unit £3.00
Variable overheads per unit £2.00
Fixed costs £60,000
Current production volume 15,000 units
All units produced are sold

Required

(a)
(i) Calculate the breakeven point in units and in sales revenue.
(ii) Calculate the margin of safety.
(iii) Prepare a profit statement for product X.

b)
The company has identified that there is demand in the market for another 5,000 units of
product X but its present machinery can only cope with the present production level.
Therefore the company is considering investing in a new machine, which will have the
effect on reducing the variable costs by £3 per unit and increasing the fixed costs by
£30,000 – however, will provide the capacity to meet the increased sales volume.
(i) Calculate the new breakeven point in units and in sales revenue for
this proposal.

(ii) Calculate the new margin of safety for this proposal.

(iii) Produce a revised profit statement for product X.

(iv) Comment on your findings.
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