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Murphy Ltd produces tables and is considering producing a new garden table for the Spanish market. The proposed price and cost structure for one garden
Murphy Ltd produces tables and is considering producing a new garden table for the Spanish market. The proposed price and cost structure for one garden table is as follows: Murphy Ltd is budgeting for sales of 5,000 tables but feels he could sell 6,000 tables if demand is high. Total fixed costs for the year are budgeted at 60,000. Required: (a) Prepare profit statements if: (i) budgeted sales are achieved. (ii) the higher level of demand is achieved. (10 Marks) (b) Calculate the breakeven point in units. (7 Marks) (c) Calculate the margin of safety in units and express it as a percentage of expected sales of 5,000 tables. (4 Marks) (d) Calculate how many units would need to be sold to generate a net profit of 80,000. (4 Marks) [Total: 25 Marks]
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