A company has the following costs for the first quarter of 2021 Cost Item Shs. Employee salaries.
Question:
A company has the following costs for the first quarter of 2021
Cost Item Shs.
Employee salaries. 17,000
Rent. 11,000
Insurance. 2,000
Depreciation on equipment. 6,000
Variable costs: Labour 24,000
: Materials 14,000
: Direct Expenses 2,000
: Overheads 2,000
Additional information:
The selling price per unit is Shs. 10.
The above variable costs relate to activity level of Shs. 60,000 sales.
All other costs except those indicated as variable are fixed.
The budgeted sales for the year are Shs. 200,000
Required:
i)Calculate the break-even point in units and in shillings.(4 marks)
ii)Calculate the Margin of Safety in units and in shillings and the margin of safety
ratio (3 marks)
iii) The company aims at generating a net income of at least Sh 21,000.If the company's tax rate is 30%, determine how many units the company should be able to sell and the amount of total sales in order to achieve this target. (3 marks)
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura