Basic. The following information is required for sub-questions

(a) and (b).

W Ltd makes leather purses. It has drawn up the following budget for its next financial period:

Selling price per unit $11.60 Variable production cost per unit $3.40 Sales commission 5% of selling price Fixed production costs $430500 Fixed selling and administration costs $198150 Sales 90000 units

(a) The margin of safety represents:

(i) 5.6% of budgeted sales

(ii) 8.3% of budgeted sales

(iii) 11.6% of budgeted sales

(iv) 14.8% of budgeted sales

(b) The marketing manager has indicated that an increase in the selling price to $12.25 per unit would not affect the number of units sold, provided that the sales commission is increased to 8 per cent of the selling price.

These changes will cause the break-even point (to the nearest whole number) to be:

(i) 71033 units

(ii) 76016 units

(iii) 79879 units

(iv) 87070 units CIMA - Management Accounting Fundamentals