a. Based on last year results, calculate: (5 marks) i) Total variable costs and total fixed costs. ii) Contribution margin ratio. iii) Sales revenue at the break-even point. iv) The margin of safety in a percentage (%) term. v) The number of units the company will have to sell to earn a profit that equals 20% of the sales revenue.

b. Explain the assumptions of break-even analysis. (Word limit: 100) (5 marks) c. It is often said that the variable cost associated with a passenger of a low-cost airline carrier such as EasyJet or Ryanair is zero and this allows the airline to offer flights to customers at a very low price or even free. Explain whether you agree with this statement. (Word limit: 300) (10 marks) d. Wardour Street Ltd., a subsidiary of Oakley Green, manufactures and sells woods. Manufacturing overhead is allocated to work in the process using an estimated overhead rate. Beginning and ending work in process were both zero. Transactions for the company during December are shown as follows: Direct materials issued to production $180,000 Indirect materials issued to production $35,000 Other manufacturing overhead $245,000 Overhead allocated $230,000 Direct labour costs $75,000 Is the manufacturing overhead under- or over-applied? By how much? (5 marks)

Question 1 (25 Marks) Oakley Green is a company specializing in making tables and chairs. The latest Income Statement is presented in the table below: $ 60,000 $17,800 $ 4,800 $ 19,400 $ 42,000 Sales revenue (2,000 units) Manufacturing costs of goods sold: Direct materials and labor (variable) costs Variable manufacturing overhead costs Fixed manufacturing overhead costs Total manufacturing costs of goods sold: Selling and Administrative costs: Variable Selling costs Fixed Administrative costs Total Selling and Administrative costs: Total costs Profit $ 5,500 $ 6,830 $ 12,330 $ 54,330 $ 5,670 Required: a. Based on last year results, calculate: (5 marks) i) ii) Total variable costs and total fixed costs. Contribution margin ratio. Sales revenue at the break-even point. The margin of safety in a percentage (%) term. The number of units the company will have to sell to earn a profit that equals 20% of the sales iv) V) revenue. b. Explain the assumptions of break-even analysis. (Word limit: 100) (5 marks) c. It is often said that the variable cost associated with a passenger of a low-cost airline carrier such as EasyJet or Ryanair is zero and this allows the airline to offer flights to customers at a very low price or even free. Explain whether you agree with this statement. (Word limit: 300) (10 marks) d. Wardour Street Ltd., a subsidiary of Oakley Green, manufactures and sells woods. Manufacturing overhead is allocated to work in the process using an estimated overhead rate. Beginning and ending work in process were both zero. Transactions for the company during December are shown as follows: Direct materials issued to production Indirect materials issued to production Other manufacturing overhead Overhead allocated Direct labour costs $180,000 $35,000 $245,000 $230,000 $75,000 Is the manufacturing overhead under- or over-applied? By how much