Exercise 18 (4 points)

A retail trade company has a coverage ratio of 20%.

All other things being equal, show using a calculation how the coverage ratio is affected by a 10% increase in the company's variable costs.

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The company Abacus AS has set up the following unit calculation:

Sales price per unit 75,000

Direct material costs (DM)

Direct labor costs (DL)

Indirect variable costs in the manufacturing department Indirect fixed costs in the manufacturing department

22,000 16,000 6,000 8,000

Total manufacturing costs 52,000

Indirect variable costs in the sales department 4,000 Indirect fixed costs in the sales department 7,000

Cost 63,000

Profit 12,000

The calculation is based on normal production and sales per period of 900 units. The fixed costs are operationally independent within the maximum capacity (1,000 units per period).

The accounting summary above forms the basis for tasks 19, 20 and 21.