SK Corporation has provided the following miscellaneous information regarding the operations of financial year 2020;

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Sales 10,000,000

Direct materials used 4,000,000

Direct labour 1,500,000

Fixed manufacturing overheads 2,000,000

Fixed selling and administration expenses 1,000,000

Gross profit 2,000,000

Net loss 500,000

Required

Calculate:

(i)Factory cost of goods sold

(ii)Variable factory overhead

(iii)Variable selling and administration expenses

(iv)Contribution margin in in shillings

(v)Break-even point in shillings

Question two

Business entities are going through tough times due to the prevailing economic situation. As a management accounting student, you should have adequate understanding on how such businesses should deal with their costs. Below are possible approaches that business should focus on as they target reduction of the costs;

1.Breakeven Analysis

2.Relevant Range Analysis

3.Total Cost Analysis

4.Waste Analysis

5.Process Analysis

Required

a.Evaluate how each of the above approaches can be used to reduce costs in manufacturing companies in Kenya.

b.Explain the cost reduction priorities that should guide you as you implement the cost reduction strategies.