Unit 5 CVP & Break Even Analysis Tutorial Questions Apply your Learning DIANA DEMBLE Diana Demble manufactures a maximum of 1,000 plastic vases per month. The costs are 25p for the plastic, and 25p for wages in respect of each vase manufactured. The monthly costs (overheads) of the factory are 1,000, which are incurred regardless of the level of activity (production / sales). The vases are sold for 2 each. Required: (a) Given that Diana Demble always sells all that she manufactures, what is her profit when she manufactures the maximum number of vases, and what is the profit per vase? (b) If Diana Demble manufactures and sells 500 vases in a month, what will her profit be for that month? (c) Why cannot you not use the following calculation to answer (b) above: 500 * profit per vase (d) What is Diana Demble's breakeven point in units and in sales value? (e) Construct a breakeven graph and highlight on the graph: The breakeven point in units and sales value The approximate level of profit or loss at 500 units of production/sales The level of activity required to achieve a profit of 375 MELNO COMPANY Melno Company manufactures and sells drums. The company sales figures were 450,000 for the last quarter. The company was able to sell each drum at the cost of 30, out of which about 12 could be attributed to variable expenses. 54,000 profit was made during the last quarter. Required: (a) Compute the contribution margin ratio. (b) Calculate the quarterly break even points in units sold and in Es. (c) Calculate the company's margin of safety in both Es and percentage terms. (d) How many units would have to be sold each quarter to earn a target profit of 90,000? (e) if the sales increase by 60,000 in the next quarter and there is no change in fixed expenses, calculate by how much percentage the quarterly profits will increase? (A Construct a CVP graph for volume range of O units to 20,000 units with an increment of 2,500 units. Indicate the break even point, the profit and loss areas and the margin of safety for the 90,000 target profit. Question 1 20 pts Based on Diana Demble: Given that Diana Demble always sells all that she manufactures, what is her profit per vase when she manufactures the maximum number of vases? 50p 500 0 1,500 1.50 Question 2 20 pts Based on Diana Demble: If Diana Demble manufactures and sells 500 vases in a month, she will make a profit of 250 for that month? True False Question 3 20 pts Based on Diana Demble: What is Diana Demble's breakeven point in units (round your figure to the nearest whole vase)? Question 4 2. Based on Melno Company: What is the break even point in monetary value (express your answer in pounds only, do not use a decimal point or pence e.g. 45,000)? Question 5 20 pts Based on Melno Company: How many units would have to be sold each quarter to earn a target profit of 90,000