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22. The accountant at Lincoln Ltd has heard about CVP analysis and wishes to use this technique to aid with planning. Lincoln Ltd currently manufactures
22. The accountant at Lincoln Ltd has heard about CVP analysis and wishes to use this technique to aid with planning. Lincoln Ltd currently manufactures and sells 20,000 units per month of a single product. The product sells for 25 per unit and has variable costs of 15 per unit. Monthly total fixed costs are 100,000. Required (maximum word count: 500 words): a) Calculate how many units must be sold to earn a monthly 120,000 profit. [4 marks] b) Calculate the monthly profit that would be achieved if 25,000 units were sold. [3 marks) c) Calculate the break-even point in units and I's). [3 marks] d) Calculate the margin of safety at the planned volume of activity (in units, 's and as a percentage). [4 marks] e) Identify and explain the assumptions behind CVP analysis. [6 marks] [Total: 20 Marks] 23. The following information relates to the financial statements for Bluebell plc for the year ended 31 May 2021: 1) The Statement of Profit or Loss shows a profit of 247,000 for the year. ii) The statement also shows an expense of 33,000 relating to rent. This includes an invoice received on 25 April 2021 for 6,000 relating to the three months ending 31 July 2021. iii) Share capital at the start of the year was made up of 500,000 2 ordinary shares. Share premium at the start of the year was 150,000 and retained earnings were 470,000. iv) On 1 January 2021, Bluebell plc issued 100,000 new 2 ordinary shares in return for 600,000 in cash. V) A final dividend of 36,000 was approved by the shareholders on 25 May 2021 but wasn't paid until 15 June 2021. Required (maximum word count: 250 words): a) Prepare the statement of changes in equity for Bluebell plc, for the year ended 31 May 2021. [8 marks] b) With reference to the Conceptual Framework for Financial Reporting, explain why dividends are not recognised as an expense in the Statement of Profit or Loss
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