From the following information you are required to construct:

a break-even chart, showing the break-even point and the margin of safety;

a chart displaying the contribution level and the profit level; (iii) a profit–volume chart.

                                Sales                                                    6000 units at Br.12 per unit = Br.72 000 

                                Variable costs                                     6000 units at Br.7 per unit = Br.42 000

                                Fixed costs                                                                                      = Br.20 000

State the purposes of each of the three charts in (a) above.  

Outline the limitations of break-even analysis.  

What are the advantages of graphical presentation of financial data to executives?

 

Question 2: 

A company produces and sells two products with the following costs:

                                                                                                Product X                  Product Y 

                Variable costs per Br. of sales               Br.0.45                        Br.0.6

                Fixed costs per period                         Br.1 212 000               Br.1 212 000

Total sales revenue is currently generated by the two products in the following proportions:

                                Product X                   70%

                                Product Y                    30%

Required: 

Calculate the break-even sales revenue per period, based on the sales mix assumed above.  

Prepare a profit–volume chart of the above situation for sales revenue up to Br.4 000 000. Show on the same chart the effect of a change in the sales mix to product X 50%, product Y 50%. Clearly indicate on the chart the break-even point for each situation.  

Of the fixed costs Br.455 000 are attributable to product X. Calculate the sales revenue required on product X in order to recover the attributable fixed costs and provide a net contribution of Br.700 000 towards general fixed costs and profit.