Question
Multi-Make Ltd manufactures self-assemble radio kits.Each unit sells for $8, and the business has a relevant range of production between 30 000 and 60 000
Multi-Make Ltd manufactures self-assemble radio kits.Each unit sells for $8, and the business has a relevant range of production between 30 000 and 60 000 units per year. The budget for the coming year is as follows:
Sales (50,000 units) Less variable costs Manufacturing
Direct Material Direct Labour Variable Overhead
Total Manufacturing Marketing
Advertising salaries Total Variable cost Contribution Margin Less Fixed costs
Manufacturing
Marketing Total Fixed Cost
Profit before tax
Required:
$400,000
$87,500 $57,500 $50,000
$195,000 $105,000
$ 45,000 $ 27,000
$300,000
$ 72,000
$28,000
a) The company wishes to know what sales are required to achieve a profit before tax of $45,000? (5 Marks)
b) The firm also wants to know what sales are necessary to provide a profit of 10% on sales ? (5 Marks)
c) Explain and describe the meaning of outcome a and b. (5 Marks)
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