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TASK 2 COMPDECK QSM PLC also produces bespoke chairs to go with the computer desks in the CHERS Division. The forecasts for the year 2020
TASK 2 COMPDECK QSM PLC also produces bespoke chairs to go with the computer desks in the CHERS Division. The forecasts for the year 2020 are that fixed costs will be 15,000,000; variable costs per chair will be 360; and sales price will be 500 per chair. Sales for the year is forecasts at 500,000 chairs. (a) How many chairs will have to be made and sold for the CHERS Division to breakeven? (6 marks) (b) Calculate the company's margin of safety as a percentage of sales. (8 marks) (c) The Managing Director of CHERS Division has declared that the profit target for the for the year 2020 is to be 60,000,000. How many chairs does the division need to make and sell in order to achieve that target profit? (8 marks) (d) The director's of COMDECK QSM PLC were advised by the company's external accountant that for the company to be successful, each unit that the company sells should have a positive contribution. However, the directors do not understand what the accountant meant by the term 'contribution'. Provide a brief note for the directors that explains what the contribution means. (8 marks)
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