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A company makes a single product with the following data:
Selling price-25
Material-5
Labour-7
Variable overhead-3
Fixed overhead-4
Profit per unit-6
budgeted output is 30000 unitsIn relation to this data, which of the following statements is correct?
The margin of safety is 40%
The contribution to sales ratio is 24%
The volume of sales needed to make a profit of $270,000 is 45,000 units
If budgeted sales increase to 40,000 units, budgeted profit will increase by $100,000
hi can you please explain how the last one is correct. i know that the answer is the last option since the first three aren’t correct but it would be really helpful if you could explain it with working
The total fixed overheads of $120,000 will not change with the level of production, by definition.
All that changes is the total contribution. The contribution is $10 per unit and so if the sales increase by 10,000 units then the total contribution will increase by 10,000 x $10 = $100,000 and therefore the profit will also increase by $100,000.
Hi John,
.
Could you help me please?So, when do I read “budgeted profit” I have to consider the contribution?
I was multiplying the profit per unit ($6*30.000) and using the difference.That confused me a little.
Thanks in advance.
Kind Regards
Claudia BrunharoYes you do need to consider the contribution because the fixed overheads stay fixed in total.
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First 10 units take 100hours and 10 to 30 further take 150 hours find the learning rate
Plz help me sir in this calculation
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