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

 

Transcribed Image Text:

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.

Expert Answer

Answer to question 1: Step1: Break even point(BEP) formula is Fixed cost contribution per unit. Ther View the full answer