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Question 4 Comex Company produces backpacks. Annual budget data for FY 2021 follows. Projected sales are 50,000 backpacks for FY 2021. Show workings. Sales revenue
Question 4 Comex Company produces backpacks. Annual budget data for FY 2021 follows. Projected sales are 50,000 backpacks for FY 2021. Show workings. Sales revenue $2,500,000 Manufacturing costs: Fixed 632,000 Variable 500,000 Selling and Administrative costs: Fixed 200,000 Variable 700,000 (a) Use CVP analysis to determine the unit contribution margin, breakeven point in units and breakeven point in dollars. (9 marks) (6) Use CVP analysis to determine the profit for FY 2021. Ignore income taxes. (4 marks) c) Use CVP analysis to determine the number of required units if Comex Company plans to double the profit computed in Question 46. Ignore income taxes. (4 marks) (d) This question is independent of the earlier parts. Suppose there are two companies - Company A and Company B. They are identical in most aspects. Specifically, they sell the same products and have the same fixed expenses, unit variable expense, and net profit. However, Company A charges a lower price while Company B charges a higher price. Use CVP analysis to explain how Company A can earn the same profit as Company B despite charging a lower price for its products. (4 marks) This question is independent of the earlier parts. Suppose sales volume increase by the same percentage for Company X and Company Y. Use CVP analysis to explain which company will experience a larger percentage increase in profits? Company X - Dominated by fixed expenses, or Company Y-Dominated by variable expenses
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