Dovic (Pty) Ltd produce a single product, called 19. Budget and actual selling price and prime cost elements per unit are:

		Budget R	Actual R
Selling Price / unit		R40.00	R38.00
Direct Material / unit		9.00	8.00
Direct Labour / unit		14.00	15.00

The company uses a fully integrated standard absorption costing system. The budgeted manufacturing overheads were determined according to the following cost volume relationship:

Overheads	R744 000	R804 000
Units	80 000	100 000

Note: Normal operating activity is the mid-point of the low and high activity levels.

A scrutiny of the fixed production overhead control account, for the period under review, shows the following entries:

Actual expenditure	R520 000	Absorbed 86 950 units @ R5.60/unit	R486 920
		Under-recovery	R33 080
	R520 000		R520 000

The budgeted performance report has been prepared as follows:

Sales units	90 000
Net profit	R756 000
P/V Ratio	35%
Break-even Units	36 000
Break-even Value	R3 240 000
Margin of Safety	60%

In preparing the actual results, the following additional information must be noted:

• actual sales units and actual production units were equal, i.e. no stock movement
• a favourable variance of R1/unit for the variable manufacturing overhead was achieved

QUESTIONS:

Q1

he actual contribution per unit for product '19' is:

R17

R15

R13

Q2:

The actual product cost per unit for product '19' according to variable costing principles is:

R23

R25

R26

Write a short report, showing how the company has performed.

Q3:

Dovic (Pty) Ltd's actual net profit for the period under review is:

R33 080

R486 920

R610 350

R756 000

What is Dovic (Pty) Ltd's actual Margin of Safety? [Note: Show how you calculated it]

Q4:

What is Dovic (Pty) Ltd's actual Breakeven Point in units? [Note: Show how you calculated it]

Q5:

What is Dovic (Pty) Ltd's actual Profit/Volume ( Contribution Margin) Ratio? [Note: Show how you calculated it]