Question
Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below: Budgeted sales
Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below:
Budgeted sales 10,000 units
Sales
2,000,000
Direct Materials
800,000
Direct Labour
400,000
Fixed Overheads
500,000
Total costs
1,700,000
Total Profit
300,000
a) Produce a profit statement for the year ending 31 December 2012, assuming actual sales are 12,000 units.
b) Calculate the break-even point for the year ending 31 December 2012 and the margin of safety expressed as a percentage of the original budgeted sales.
c) Calculate the revised breakeven point if a new wage settlement increases direct labour costs by 20%.
d) Assuming sales of 10,000 units are achieved, and the new wage settlement is never agreed, calculate the selling price per unit that would earn a total profit of 500,000.
e) Discuss the limitations of breakeven analysis.
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