company has calculated its margin of safety as 20% on budgeted sales and budgete

Question

company has calculated its margin of safety as 20% on budgeted sales and budgeted sales are 5,000 units per month. What would be the budgeted fixed costs if the budgeted contribution was $25 per unit? Question Three H Limited manufactures and sells two products, J and K. Annual sales are expected to be in the ratio of J:1, K:3. Total annual sales are planned to be $420,000. Product J has a contribution to sales ratio of 40%, whereas that of product K is 50%. Annual fixed costs are estimated to be $120,000. Required The budgeted break-even sales value to the nearest $1,000) Question Four Z plc currently sells products Aye, Bee, and Cee in equal quantities and at the same selling price per unit. The contribution to sales ratios for products Aye is 40%; for product Bee is 50% and the total is 48%. If fixed costs are unaffected by mix and are currently 20% of sales, find the effect of changing the product mix to : Aye 40%; Bee 25%; and Cee 35% in the total Contribution/Total sales ratio.

Explanation / Answer

Answer 2

Margin of safety = 20% of budgeted sales

Break even sales = 100% - 20% = 80%

Budgeted sales = 5000 units

then break even sales = 5000*80% = 4000 units

Contribution of 4000 units = 4000*25 = 100000

then fixed cost = 100000 as on break even sales contribution is equal to fixed cost

Ans is 10000

Answer 3 J K Sales (1:3) 105000 315000 Total Sales 420000 Contribution % 40% 50% Contribution 42000 157500 Less: - Fixed Cost -30000 -90000 Profit 12000 67500 Breakeven Sales Fixedcost/contribution 75000 180000 Answer 4 A B C total contribution = 48% 144 Let selling price be 100 100 100 100 Less - Contribution of A 40 Then contribution 40 50 54 Less - Contribution of B 50 Fixed cost 20 20 20 then cont. of C 54 Profit 20 30 34 If product mix is 40 / 25 / 35% A B C Contribution % is Let selling price be 100 120 75 105 40 / 50 /54% Then contribution 48 37.5 56.7 Fixed cost 20 20 20 Profit 28 17.5 36.7

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