Question
Scarcity Enterprise makes three products, AL, BE and OM. The following information was provided in order to do a cost, volume, profit analysis. AL BE
Scarcity Enterprise makes three products, AL, BE and OM. The following information was provided in order to do a cost, volume, profit analysis.
AL BE OM
$ $ $
Selling price 180 270 240
Less Variable Expenses:
Direct materials 24 72 32
Other variable expenses 102 90 148
Total variable expenses 126 162 180
Demand (units) 500 500 500
Total fixed cost $721,500
Required:
I. Advise management on the amount of each product to manufacture to break-even. Show all workings. [11 marks]
II. Calculate the amount of each product to manufacture to make a profit of $111,000 before tax. Show all workings. [6 marks]
III. List three assumptions of CVP [3 marks]
IV. Explain the term margin of safety and state three ways in which it can be expressed.
[4 marks]
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