Ken owns a manufacturing business which makes a single product. The...

Ken owns a manufacturing business which makes a single product. The following figures

apply for all relevant periods.

Per unit $

Selling price 35

Direct material 9

Direct labour 11

Fixed manufacturing overheads 5

Fixed manufacturing overheads are absorbed into product costs at pre-determined rates per unit

of output. Under- or over-absorbed manufacturing overheads are transferred to profit and loss in

the period in which they occur. Normal production is 80 000 units per accounting period.

REQUIRED:

(a) Calculate the break-even point in both units and dollars, based on the information above.

The following information has been acquired for the last three accounting periods.

Three months ended 28 February 31 May 31 August

Units Units Units

Sales 60 000 80 000 45 000

Stock at start of period 15 000 0 35 000

Stock at end of period 0 35 000 20 000

(b) Calculate the profit or loss in each period using marginal costing.

(c) Calculate the profit or loss in each period using absorption costing.

Answer rating: 100% (QA)

a BreakEven Point calculation Breakeven point represents the level of activity where revenues cover all variable and fixed expenses In this case we ha... View the full answer