1) XYZ Ltd produces two products and the following budget applies for the next year: Selling...

 

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1) XYZ Ltd produces two products and the following budget applies for the next year: Selling price Variable costs Contribution margin Fixed costs apportioned Units sold Product X (£) 6 2 4 Sales Less: Variable costs Contribution margin. 100000 70000 Less Fixed costs profit You are required to calculate the break-even points for each product and the company as a whole and comment on your findings. 2) The profit statements for two different companies in the same industry are as follows: Company B(£000) 10 000 4 000 Product Y (£) 12 4 8 Company A(£000) 10 000 200000 30000 8.000 2 000 1 000 1 000 6.000 5 000 1000 (a) Compute the degree of operating leverage for each company. (b) Compute the break-even point for each company. Explain why the break-even point for Company B is higher. (c) Assume that both companies experience a 50 per cent increase in sales revenues. Explain why the percentage increase in Company B's profits is significantly larger than that of Company A. 1) XYZ Ltd produces two products and the following budget applies for the next year: Selling price Variable costs Contribution margin Fixed costs apportioned Units sold Product X (£) 6 2 4 Sales Less: Variable costs Contribution margin. 100000 70000 Less Fixed costs profit You are required to calculate the break-even points for each product and the company as a whole and comment on your findings. 2) The profit statements for two different companies in the same industry are as follows: Company B(£000) 10 000 4 000 Product Y (£) 12 4 8 Company A(£000) 10 000 200000 30000 8.000 2 000 1 000 1 000 6.000 5 000 1000 (a) Compute the degree of operating leverage for each company. (b) Compute the break-even point for each company. Explain why the break-even point for Company B is higher. (c) Assume that both companies experience a 50 per cent increase in sales revenues. Explain why the percentage increase in Company B's profits is significantly larger than that of Company A.

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Answer to question 1 Step1 Break even pointBEP formula is Fixed cost contribution per unit Therefore ... View the full answer