Norton Ltd manufactures a single product, which is sold for $150 per unit. The standard variable costs per unit of the product are: Direct material 4 kilos at $8 per kilo Direct labour 5 hours at $10 per hour Production overhead $2.5 per direct labour hour Sales overhead $5 per unitThe company expects to manufacture and sell 8,000 units in total during the forthcoming year (Year 1). The fixed overhead costs for the forthcoming year are:$ Production 60,000 Administration 35,000 Sales 11,000Required:

(a) Calculate profit in Total for Year1(5 marks)

(b) Calculate for the forthcoming year (Year 1):

(i) The break-even point in dollars and units (ii) The margin of safety in dollars and units (iii) The amount of sales in units that would earn the company a profit of $180,000(12 marks)

(c) The following cost increases are expected in the following year (Year 2): Variable costs: +10% Fixed Cost: +8% Required: Calculate for Year 2:

(i) The break-even point in units and dollars using the variable and fixed cost calculated in (c) above.(5 marks) (ii) The amount of sales in units to earn the company a profit of $180,000 if the selling price was raised to $150.(3 marks) (Total 25 marks)

Answer rating: 100% (QA)

a Profit in Year 1 textTotal Revenue textSelling PricetextNumber of Units Sold textTotal Revenue 1508000 1200000 textTotal Variable Costs textDirect M... View the full answer