Question
Safety first Ltd manufactures and sells two products reusable face masks and face shields. Details of selling prices and variable cost per box of face
Safety first Ltd manufactures and sells two products reusable face masks and face shields. Details of selling prices and variable cost per box of face masks and unit of face shield are as follows:
Face masks | Face shields | |
Selling price | 8 | 4 |
Variable costs | 5 | 2.60 |
Current Sales Mix | 2 | 1 |
Safety first Ltd budgeted fixed cost for the year is 407,000, and budgeted sales revenue for the coming year is expected to be 1,250,000 for the standard mix.
Required:
1. Calculate the break-even units and sales value () in terms of mix and each product. (6 marks)
2. Calculate the margin of safety sales value () and percentage. (4 marks)
3. After the latest Government announcement that wearing a face mask is not mandatory anymore. The management of Safety first Ltd is considering changing the sales mix ratio to 2: 2 and focusing on producing more face shields. Re-calculate required (1) and (2) above. Advice the manager of Safety first Ltd on whether to adopt this plan or not? Justify your answer. (10 marks)
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