Intermediate: Calculation of sales by individual products to achieve a target contribution A company manufactures and sells
Question:
Intermediate: Calculation of sales by individual products to achieve a target contribution A company manufactures and sells three products which currently have the following annual trading performance:
For each product, units produced and sold were the same in the period.
Fixed production overheads are absorbed at a rate of £0.30 per unit for each product. Non¬ production overheads include certain costs which vary with activity at a rate of 10% of sales value. The remaining non-production overheads are fixed costs.
Required:
(a) Prepare a statement, in marginal costing for¬ mat, showing the sales, costs, and profit contribution of each product expressed both in £ per unit (to three decimal places) and also as a % of sales (to one decimal place);
(8 marks)
(b) Calculate, based upon the current mix of sales, the sales required of each product (to the nearest £000) in order to generate a total contribution of £3.75m per annum.LO1
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