New Applied Skills Mock Exam_Part B_Becca Question

Becca is setting up a baking business. She has developed recipes for chocolate brownies and chocolate truffles.

The following standard cost information is available:

Chocolate brownies $/unit Chocolate truffles $/unit
Selling price 3.00 4.00
Direct materials:
– Flour 0.40 0.50
– Other – eggs, fats etc 0.20 0.30
Direct labour 0.60 0.80
Variable overhead 0.30 0.45
Fixed overhead 0.90 0.80
____ ____
Profit per unit 0.60 1.15
____ ____
Budgeted production 1,000 units per week 3,000 units per month

Question 1: Becca has decided to only bake chocolate brownies to begin with.
How many chocolate brownies would Becca need to sell per annum to breakeven?
(answer: 50,400).

Question 2: Becca has now started baking chocolate truffles as well as chocolate brownies.
What is the budgeted breakeven revenue, assuming that the two products are sold in their budgeted mix?
Answer: 153,036

Question 3: The chocolate truffles have proved very popular and demand has increased rapidly. Becca has decided to cease baking chocolate brownies and concentrate on truffles.

Total fixed costs have fallen by 10%, but variable costs per unit remain the same. Becca expects to now have a contribution/sales ratio of 59%.

What is the annual breakeven point in units, to the nearest unit?
(answer:23,064)