QUESTION TWO

a) Okapi enterprises sell two products. Model A100 and model B900. Monthly sales and the

contribution margin ratios for the two products follow:

Product

Model A100 Model B900 Total

Sales (in sh.) 700,000 300,000 1,000,000

Contribution margin

Ratio 60% 70%

The company fixed expenses total Sh.598, 500 per month.

Required:

i. Prepare an income statement for the company as a whole. (6 Marks)

ii. Compute the break-even point for the company and for each product (10 marks)

b) Super sales company is the exclusive distributor for a revolutionary book bag. The product sells for

Sh.60 per unit and has a contribution margin ratio of 40%. The company's fixed expenses are

Sh.360, 000 per year.

Required:

i. Compute the variable expenses per unit? (2 marks)

ii. Compute the break-even point? (4 marks)

iii. What sales level in units and in shillings is required to earn an annual profit of

Sh.90,000? (3 marks)