Q. 3: Accounting a) Bill Wong manufactures and sells compact discs. Price and co

Question

Q. 3: Accounting a) Bill Wong manufactures and sells compact discs. Price and cost data are as follows: 30.00 Selling price per unit Variable cost per unit: Direct materials Direct labour Manufacturing overhead Sales commission Total variable c 11.00 5.00 4.00 1.50 osts per unit Annual fixed costs Manufacturing overhead Selling and administration Total annual fixed costs Forecast annual sales volume for 2016 193 000 270 000 120 000 units Required: i) What is the contribution margin per compact disc? ii) What is Bill Wong break-even point in units? iii) What is Bill Wong break-even point in sales dollars? iv) What is Bill Wong anticipated net profit before tax for 2016? Give two reasons why net profit in the income statement will be different to the final cash balance in the Bank Åccount b) (2x5-10 marks)

Explanation / Answer

i.

ii. BEP in units= Total fixed costs/ contribution per unit= 463000/8.5= 54471

iii. BEP in dollars= BEP units* selling price= 54471*30= 1634130

iv. Anticipated net profit:

b. Net profit can be different to cash balance due to:

Depreciation expense in overhead allocation,

Credit sales still not collected

Credit purchases still not paid

Particulars Per unit Sale units 1 Selling price 30 Less: Variable costs: Direct material 11 Direct labor 5 Manufacturing OH 4 Sales commission 1.5 Total Variable costs 21.5 Contribution per unit 8.5

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