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October 20, 2021 at 10:34 pm
Sir, my knowledge is that Margin of Safety = Budgeted sales-BREAKEVEN POINT/Budgeted sales. Where BREAKEVEN POINT =Total fixed cost/contribution
Why did you use BREAKEVEN sales revenue(fixed cost/CSratio) instead of BREAKEVEN POINT?
October 20, 2021 at 10:56 pm
I’m referring to question 5
John Moffat says
October 21, 2021 at 4:32 am
You will get exactly the same answer for the margin of safety whether you use units or $’s revenue. Since the question asked for the breakeven revenue it is faster to calculate the margin of safety on the revenue instead of on the units.
September 27, 2021 at 11:26 am
Sir please can you help me with Question 1. i don’t understand why the variable cost per unit was divided by the 70% of sales to get the selling price per unit.
September 27, 2021 at 5:23 pm
The contribution is 30% of the sales. Given that the contribution is the sales less the variable costs, it means that the variable costs must be 70% of the sales.
April 28, 2020 at 4:33 am
In question 2 , Is there a missing of per unit in variable cost ?
Otherwise it may then refer to total variable cost.
April 28, 2020 at 9:19 am
It is per unit (it could not possibly be the total cost 🙂 )
February 21, 2019 at 10:04 am
hi sir ,
in question 4, i used a different approach but i arrived at the same answer. kindly advice if it right to use this.
1. found total Total variable cost= 8.40 +3.60+ 1.44= 13.44
2. contribution for x , which is sales less total variable cost = 24-13.44 = 10.56
3.found budgeted fixed cost for both x and y = (2.88×10,000) +(2.4 x 12500) = 58800
4 Fixed cost when producing x only is 58800 – 6000 = 52800
5.if b represents the total number of units that is needed to be produced inorder to get a target profit of 144,000
(10.56 x b) – 52800 = 144000
10.56b = 144000+ 52800
b = 196800/10.56
b=18636.6 units of x produced
February 21, 2019 at 4:04 pm
Yes – your approach is fine 🙂
February 21, 2019 at 4:45 pm
Thanks soo much.
February 12, 2019 at 8:36 pm
in question 5.
we see that the solutions says (25 X 100,000) gives 2,500,000 how possible is that sir
February 13, 2019 at 8:47 am
But 100,000 x $25 does equal $2,500,000 !!
February 13, 2019 at 10:17 am
apologies my error
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