QUESTION 1

A company manufactures and sells a single product which has the following cost and selling price structure: /unit /unit Selling price 120 Direct material 22 Direct labour 36 Variable overhead 14 Fixed overhead 12 84 Profit per unit 36 The fixed overhead absorption rate is based on the normal capacity of 2,000 units per month. Assume that the same amount is spent each month on fixed overheads. Budgeted sales for next month are 2,200 units.

You are required to calculate: (i) the breakeven point, in sales units per month; (ii) the margin of safety for next month; (iii) the budgeted profit for next month; (iv) the sales required to achieve a profit of 96,000 in a month.