Section 4: Cost-Volume-Profit Analysis 20 marks

Gram Ltdsells two products:BasicandPlatinum. Information about the expected sales volume, selling price and variable cost per unit of the products are as follows:

	Basic	Platinum
Selling price	$20	$ 35
Variable cost per unit
Direct material	$6	$12
Direct labour	$4	$6
Manufacturing overhead	$2	$3
Budgeted monthly sales volume	360	440

The expected monthly fixed cost is $2,000.

Assume thatGram Ltd pays income taxes of 28% and that fixed costs remain constant regardless of the number of product lines.

Required:

1. Assume that only Basicis sold. Calculate the following:
   1. Break-even in dollars. (4 marks)
   2. Target sales volume in dollars, assuming a target profit of $1,500 after tax. (5 marks)
   3. Margin of safety as a percentage. (4 marks)

1. Assume that both products are sold (Basicand Platinum). Calculate the number of Basicand the number of Platinumthat needs to be sold to break-even. (7 marks)