Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

QUESTION 3 Faithful Ltd. manufactures and sells Protector', a car alarm system. The selling price of Protector is $180.00 per unit The company sold 60,000

image text in transcribed

QUESTION 3 Faithful Ltd. manufactures and sells Protector', a car alarm system. The selling price of Protector is $180.00 per unit The company sold 60,000 units for the year ended 2019. During the year 2019, the total annual fixed costs was $1,890,000. The company's variable selling expenses was $15.50 per unit. Direct costs for each unit of the product includes direct materials amounting to $55.00 and direct labour of $32.00. The company also incurs variable manufacturing overhead of $23.50 per unit Ignore income tax considerations. (6) In 2020, Faithful pians to reorganize its manufacturing processes. As part of this exercise, its annual total fixed costs will is expected to be $2,940,000, whereas its total variable cost will be $136.50 per unit. Faithful would need to increase the selling price per unit of its product in order to continue to be profitable. The company has decided to set a targeted contribution margin of 35%. The management is aware that an increase in the selling price would decrease the demand for its product. They estimate a decrease of 5% from the number of units sold in 2019 would likely result from the change in the selling price. What is Faithful's new selling price per unit? What is the number of units that Faithful would need to sell in order to achieve a net profit equal to the net profit of 2019? Should the company proceed to reorganize its manufacturing processes? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) Ignore part (b) data and refer to the original information. Compute the margin of safety in percentage % ie. MOS%) for the year 2019. What is the MOS(%) if the number of units sold were 75,000 units, assuming all other information remains the same

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Data Analytics For Accounting

Authors: Vernon Richardson

3rd Edition

1264444907, 9781264444908

More Books

Students also viewed these Accounting questions

Question

6. How can hidden knowledge guide our actions?

Answered: 1 week ago

Question

7. How can the models we use have a detrimental effect on others?

Answered: 1 week ago