Perriwinkle Ltd manufacture and sell a single product and the following summarised information represents the original forecast profit budget and the subsequent actual results for the year ended 30 April 19_6.

Additional information:
(1) The company had prepared the profit budget on the basis that 7 000 units would be produced and sold. The number of units actually sold during the year was 7 500.
(2) No stocks of finished goods were held and there was no work ir?
progress.
Note: It should be assumed that all expense and revenue relationships remain unchanged except where specifically identified.
Required:

(a) Calculate the budget volume of sales units necessary to achieve the budget break-even point in 19_5/6.

(b) Calculate the volume of sales units to‘achieve the actual break-even point.

(c) Prepare a break-even chart to illustrate the budgeted and actual sales/costs relationships for 19_5/6. Identify the break-even points.

(d) Calculate the sales variance for 19_5/6 distinguishing between the sales price variance and the sales volume variance.

(e) Briefly outline the limitations of break-even analysis.

Transcribed Image Text:

Sales (Selling price 15 per unit) Direct materials Direct labour, Variable manufacturing overhead Fixed manufacturing overhead Gross profit Variable sales overhead Other fixed costs Net profit Actual Budget (Selling price 105 000 13.50 per unit) 101 250 21 000 23 000 14 000 10 500 16.000 43 500 7.000 16.000 11 000 18.000 33 250 8.000 12 000 12.000 24 500 13 250