Question three

Woodlands Production Ltd (WPL) is contemplating preparing a budget for the forthcoming period. The selling price per unit for its single product is K120 per unit. Budgeted sales are 200,000.

Product cost per unit:

Direct material 3 kgs @K15 per kg

Direct labour 5 hrs@K4 per DL hr

Production overhead 5 hrs @K3 per hr

Inventories:

Raw materials Finished goods

Opening 30,000 kgs 90,000 units

Closing 20,000 kgs 40,000 units

Other budgeted costs:

Administration K100,000

Selling and distribution

Variable selling and distribution K4 per unit sold.

Fixed K150,000

Finance costs K35,000

Tax is at 35%

Required

Prepare the budgeted statement of income

(Total 25 marks)

Question four

The following table has been prepared using figures from the management accounting system of ME Ltd for the just ended quarter of 2019. The quantity in units is in the relevant range which is from 0 units to 100,000 units.

Quantity (units)	0	1,000	20,000	50,000	80,000	100,000
Revenue (K million)				8
Variable cost (K million)			2.4
Fixed cost (K million)	3
Profit (K million)

Required

1. Fill in the blanks in the table.

(5 marks)

2. Calculate the breakeven point in units and in Kwacha.

(8 marks)

3. If the company wishes to earn a profit of K15, 000,000 how much should it produce and sell?

(7 marks)

4. If the margin of safety in units is 12,000 units, at what level is the ME Ltd operating? Calculate the profit at this level

(5 marks)

(Total 25 marks)