SuperSound Masters Co. Ltd. manufactures and sells compact discs. The Managing Director, Mr Williams, is interested...

 

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SuperSound Masters Co. Ltd. manufactures and sells compact discs. The Managing Director, Mr Williams, is interested in considering the various alternative situations that may impact on next year's profitability and has provided the price and historical cost data below for the accounting period ended 31st December 2020. In addition, Mr. Williams is expecting annual sales of 120,000 units (sales price constant) for the year ended 31st December 2021. £ (per unit) 25.00 Sales price Variable costs: Direct materials 10.50 Direct labour 5.00 3.00 Direct expenses Selling expenses 1.30 £ (total) Fixed costs: Manufacturing overheads 192,000 Selling and administrative expenses 276,000 (a) Calculate total annual contribution and per unit for the year ending 31st December 2021. (b) Calculate the break-even point (in unit terms and in sales revenue terms). (c) Recent international events have impacted on the supply of the direct materials. It is felt that these events will cause a 20% rise in direct material prices and Mr. Williams would like to know the potential effect of this rise on the breakeven point. Compute the adjusted breakeven point, and discuss the results. SuperSound Masters Co. Ltd. manufactures and sells compact discs. The Managing Director, Mr Williams, is interested in considering the various alternative situations that may impact on next year's profitability and has provided the price and historical cost data below for the accounting period ended 31st December 2020. In addition, Mr. Williams is expecting annual sales of 120,000 units (sales price constant) for the year ended 31st December 2021. £ (per unit) 25.00 Sales price Variable costs: Direct materials 10.50 Direct labour 5.00 3.00 Direct expenses Selling expenses 1.30 £ (total) Fixed costs: Manufacturing overheads 192,000 Selling and administrative expenses 276,000 (a) Calculate total annual contribution and per unit for the year ending 31st December 2021. (b) Calculate the break-even point (in unit terms and in sales revenue terms). (c) Recent international events have impacted on the supply of the direct materials. It is felt that these events will cause a 20% rise in direct material prices and Mr. Williams would like to know the potential effect of this rise on the breakeven point. Compute the adjusted breakeven point, and discuss the results.

Answer rating: 100% (QA)

a Calculation of Annual Contribution Margin and Per Unit Contribution for the Year ending Decemb... View the full answer