Budgeted data for the coming six months includes the following: Sales Profit (in units) January...

 

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Budgeted data for the coming six months includes the following: Sales Profit (in units) £ January February March April May June 18 20 30 22 24 16 70 000 100 000 250 000 130 000 160 000 40 000 You are told that the fixed costs for the six months have been spread evenly over the period under review to arrive at the monthly profit projections. Required: (a) Prepare a graph for total sales, costs and output for the six months under review that shows: (i) The break-even point in units and revenue. (ii) Total fixed costs. (iii) The variable cost line. (iv) The margin of safety for the total budgeted sales. (14 marks) (b) The company is worried about the low level of sales. The sales director says that if the selling price of the unit was reduced by £5000 the company would be able to sell 10% more units. All other costs would remain the same you are told. Determine whether the company should reduce the selling price to attract new sales in order to maximize profit. Clearly show any workings. (5 marks) Budgeted data for the coming six months includes the following: Sales Profit (in units) £ January February March April May June 18 20 30 22 24 16 70 000 100 000 250 000 130 000 160 000 40 000 You are told that the fixed costs for the six months have been spread evenly over the period under review to arrive at the monthly profit projections. Required: (a) Prepare a graph for total sales, costs and output for the six months under review that shows: (i) The break-even point in units and revenue. (ii) Total fixed costs. (iii) The variable cost line. (iv) The margin of safety for the total budgeted sales. (14 marks) (b) The company is worried about the low level of sales. The sales director says that if the selling price of the unit was reduced by £5000 the company would be able to sell 10% more units. All other costs would remain the same you are told. Determine whether the company should reduce the selling price to attract new sales in order to maximize profit. Clearly show any workings. (5 marks)

Answer rating: 100% (QA)

a Total sales 18 units 70000 1260000 20 units 100000 2000000 30 units 250000 7500000 Total costs 18 ... View the full answer