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a) You have been asked to compare the performance of two organisations based on their breakeven, profits and margin of safety. The performance of
a) You have been asked to compare the performance of two organisations based on their breakeven, profits and margin of safety. The performance of the FIRST organisation is as follows: Breakeven sales in units = 40,000+ Breakeven sales in dollars = $6 million+ Profit currently made based on sales of 55,000 units = $1,140,000+ Margin of safety = 15,000 units Margin of safety in $ = $2.25 million+ L You are required to calculate the SECOND organisation's performance in terms of its breakeven sales in S, current profit made in $ and the margin of safety in $ with the following information: SECOND Organisation Expected sales in units+ Expected selling price per unit + Raw material per unit 35,000 $200 t $55 Direct labour per unit $45 Other variable costs per unit $20 Insurance and Advertising $160,000 Rent Salaries Depreciation Electricity: Line charges $10,000 per annum + usage of $10 per unit sold Water charges: Fixed water charge $5,000 per annum + usage of $5 per unit sold Telephone and internet charges: Line charges of $12,000 per annum + usage of $3 per unit sold Required a) $75,000+ $650,000 $68,000 t 2 . . 1. 1. 1. 1. 1. 1. '+ . Which organisation (FIRST or SECOND) has a higher breakeven, profit and margin of safety in $? Provide supporting calculations with a table showing the total contribution margin and total profits made by SECOND organisation. All workings must be shown.
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