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Ec ltd produce and sell the following two product throughtout the year in a constant mix:
Variable cost per $ of sale = product x $0.45
Product y $0.60
Fixed cost $ 1212000
The management of ec has started the total sale revenue will reach a maximum of $ 4000000 and is generated by the two product in the following proportion:Variable cost per $ of sale: product x= 70%
Product y= 30%Calculate the breakeven sale revenue required per period based on the sale mix assum above.
Sir i didnt understand how to calcuated c/s ratio
Betis limited is considering changing the way it structure by asking its employed staff to become freeelance. Employess are currently paid fixed salary of $ 24000000 per annum but would instead be paid $ 200 per working day. On a typical working day staff can produce 40 unit. Other fixed cost are $ 400000pa
The selling price of a unit is $ 60 and material cost are $ 20 per unitWhat will be the effect of the change on the break even point of the business and the level of operating risk?
Breakeven point reduce and operating risk goes down and i didnt get the point in current breakeven point they have mentioned fixed cost of $ 240000+ $ 400000 why and new breakeven point ignore the 240000 why sir?
Edward sell two product with selling price and contribution as follow
Product f product g
Selling price 40 20
Contribution 10 4
Budgeted sale 150000 100000
UnitEdward fixed cost are 14000000 per year
Edward now anticipates that more Customer will buy the cheaper product g and that budgeted sales will be 150000 unit for each product.If this happen what would happen to the breakeven revenue??
C/s ratio of product g is lower i think mix will reduce i got this point but breakeven revenue will increase by an amount but not by the amount of extra sales of product g this is not relevant why sir
You must open a new thread for a new question – not list a whole series of questions in one thread!!
EC Ltd: If the variable cost is 70% of sales revenue, then the contribution must be 30% of the sales revenue. Therefore the CS ratio is 30%.
Betis: If the staff become freelance they are paid 200 a day and this is a variable cost. They will no longer be paid a fixed salary of $2,400,000 and so this will not longer exist.
Edward: The current overall CS ratio is 1.9M / 8M = 0.2375
Therefore the current breakeven revenue = 1.4M / 0.2375 = 5,894,737
The new overall CS ratio is 4.2M / 18M = 0.2333
Therefore the new breakeven revenue = 1/4M / 0.2333 = 6,000,857Have you watched my free lectures on CVP analysis? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
Also, you should be practicing questions using a Revision Kit from one of the ACCA approved publishers – they include answers with workings!!
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