Question 2. Interprest the following information through an Income Statement for product A401F of Ahmed Corporation. (10 Marks)

Number of Units Produced and Sold Annually

59,250 units

Selling Price per unit

BD 242

Variable Cost per Unit:

Direct Materials

BD 12.500

Direct Labor

BD 8.300

Selling & Administrative Expenses

BD 3.400

Fixed cost Per Year:

Manufacturing Overhead

BD 124,370

Selling & Administrative Expenses

BD 76,520

Question 3. In preparation for the next years operations management, Metal Incorporation came up with the following estimates.

Total

Per Unit

Sales (350,500 units)

BD 1,950,781

BD 62.210

Direct Materials

BD 300,549

BD 20.500

Direct Labor (variable)

BD 50,600

BD 2.800

Variable Manufactoring Overhead

BD 75,000

BD 3.500

Fixed Manufacturing Overhead

BD 90,500

BD 5.000

Variable Selling & Administrative Expenses

BD 150,050

BD 6.000

Fixed Selling & Administrative Expenses

BD 70,500

Bd 1.800

Prepare the following:

a) Contribution margin in units and ratio. (4 Marks)

b) Break even in dollars and Unit sales (4 marks)

c) Margin of safety in percentage and amount (4 Marks)

d) In the case of a total net income of BD 780,000 what will the degree of perating leverage be? (2 Marks)

Part II: Short Answer. Direction: Answer the below questions in your own words.

Question 1: Explain the difference between Variable and Absorption Costing. (2 Marks)

Question 2: Clarify why is it important for a company to measure its Operating Leverage. (2 Marks)