QUESTION 5 (25 marks) James Ltd. has the following information available for this year: Total costs...
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QUESTION 5 (25 marks) James Ltd. has the following information available for this year: Total costs Budgeted sales (units) The selling price is £12 per unit. September £86,000 15,000 October £146,000 30,000 *Page 4 of 7 a) What is James Ltd.'s margin of safety in units for September? (7 marks) b) If next year, fixed cost rise by 12%, variable costs fall by 4% and the BEP remains the same as the current year, how much must the selling price be? (4 marks) c) Explain why the accountant's view of breakeven is often criticised. (9 marks) d) Discuss how operational gearing affects a company's profits and give an example of how it can be increased. (5 marks) QUESTION 5 (25 marks) James Ltd. has the following information available for this year: Total costs Budgeted sales (units) The selling price is £12 per unit. September £86,000 15,000 October £146,000 30,000 *Page 4 of 7 a) What is James Ltd.'s margin of safety in units for September? (7 marks) b) If next year, fixed cost rise by 12%, variable costs fall by 4% and the BEP remains the same as the current year, how much must the selling price be? (4 marks) c) Explain why the accountant's view of breakeven is often criticised. (9 marks) d) Discuss how operational gearing affects a company's profits and give an example of how it can be increased. (5 marks)
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Expert Answer General Guidance The answer provided below has been developed in a clear step by step manner Step 1 a James Ltds margin of safety in Units September Margin of safety Units Current Sales ... View the full answer
Related Book For
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt
Posted Date:
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