Question 5

Mickey Ltd is a service firm with a current service revenue of $900 000 and a 40% contribution margin. Its fixed costs are $200,000. Minno Ltd has current sales of $420,000 and a 30% contribution margin. Its fixed costs are $90,000.

Required: SHOW WORKINGS FOR EACH SECTION

a) Make a contribution margin income statement for the two companies. b) Calculate the breakeven pointin sales dollars for the two companies. c) What is the margin of safety for the two companies? Which is stronger? d) If sales increase for both companies, which company will realise the greatest increase in

profits? Explain. e) Would the CVP Analysis technique be appropriate as a planning tool for businesses operating during the global pandemic period? Explain. Question 6 You've been approached by a friend who has sought your advice about pricing products for his video production business. He indicated that he has several new products ready to be launched and wants to review the prices of existing products.

Required: a) Make a response to answer your friend's queries. Provide specific guidelines that he can follow. Include examples in your answer.

b) Chocfee Dairy Ltd gathered this data for two of its products that it produces:

Product	Current Sales Value	Additional Processing Costs	Sales Value if Processed Further
Coffee beans	$8000	$3000	$10000
Chocolate Malt	$5000	$2000	$7000

Required:

Which of the products should be processed further?