a) You have been asked to compare the performance of two organisations based on their breakeven,...
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a) You have been asked to compare the performance of two organisations based on their breakeven, profits and margin of safety. The performance of the FIRST organisation is as follows: Breakeven sales in units=40,000 Breakeven sales in dollars = $6 million Profit currently made based on sales of 55,000 units = $1,140,000 Margin of safety = 15,000 units Margin of safety in S = $2.25 million You are required to calculate the SECOND organisation's performance in terms of its breakeven sales in $, current profit made in $ and the margin of safety in $ with the following information: SECOND Organisation Expected sales in units 35,000 Expected selling price per unit $200 Raw material per unit $55 Direct labour per unit $45 Other variable costs per unit $20 Insurance and Advertising $160,000 Rent $75,000 Salaries $650,000 $68,000 Depreciation Electricity: Line charges $10,000 per annum + usage of $10 per unit sold Water charges: Fixed water charge $5,000 per annum + usage of $5 per unit sold Telephone and internet charges: Line charges of $12,000 per annum + usage of $3 per unit sold Required a) b) Which organisation (FIRST or SECOND) has a higher breakeven, profit and margin of safety in $? Provide supporting calculations with a table showing the total contribution margin and total profits made by SECOND organisation. All workings must be shown. (10 marks) Assume that you have obtained additional information about SECOND organisation which are: a. It will increase its selling price by 7%. b. It will reduce the raw material price by 10% by using alternative suppliers; but the direct labour cost will increase by 8%. c. The salaries will increase by 5%. Required: What would the sales level be (in $) for SECOND if they want a profit of $350,000? Provide supporting calculations. (6 marks) a) You have been asked to compare the performance of two organisations based on their breakeven, profits and margin of safety. The performance of the FIRST organisation is as follows: Breakeven sales in units=40,000 Breakeven sales in dollars = $6 million Profit currently made based on sales of 55,000 units = $1,140,000 Margin of safety = 15,000 units Margin of safety in S = $2.25 million You are required to calculate the SECOND organisation's performance in terms of its breakeven sales in $, current profit made in $ and the margin of safety in $ with the following information: SECOND Organisation Expected sales in units 35,000 Expected selling price per unit $200 Raw material per unit $55 Direct labour per unit $45 Other variable costs per unit $20 Insurance and Advertising $160,000 Rent $75,000 Salaries $650,000 $68,000 Depreciation Electricity: Line charges $10,000 per annum + usage of $10 per unit sold Water charges: Fixed water charge $5,000 per annum + usage of $5 per unit sold Telephone and internet charges: Line charges of $12,000 per annum + usage of $3 per unit sold Required a) b) Which organisation (FIRST or SECOND) has a higher breakeven, profit and margin of safety in $? Provide supporting calculations with a table showing the total contribution margin and total profits made by SECOND organisation. All workings must be shown. (10 marks) Assume that you have obtained additional information about SECOND organisation which are: a. It will increase its selling price by 7%. b. It will reduce the raw material price by 10% by using alternative suppliers; but the direct labour cost will increase by 8%. c. The salaries will increase by 5%. Required: What would the sales level be (in $) for SECOND if they want a profit of $350,000? Provide supporting calculations. (6 marks)
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Answer rating: 100% (QA)
To calculate the SECOND organisations performance 1 Breakeven sales in dollars Total fixed costs Insurance and Advertising Rent Salaries Depreciation Total fixed costs 75000 650000 68000 10000 5000 12... View the full answer
Related Book For
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
Posted Date:
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