The Management Accountant of Kafululu Plc has prepared the following budget information for the year ending 31st December 2022 for product A. Annual Fixed Costs K270,000.00 Variable costs per unit K90.00 Contribution to sales ratio(C/S) 75% Annual budget units 1,500 Required: a) Calculate the contribution per unit for Product A. b) Calculate the Unit Selling Price for Product A. c) Calculate the Break Even Point for Product A. d) Calculate the margin of safety in Units and in percentage terms. e) If the Selling Price per Unit is reduced by 10%, variable cost per Unit is increased to K100.00 and Fixed costs remain unchanged, calculate: i. The new Breakeven Point. ii. The total units that should be sold in order to make a profit of K450,000 in 2020. (
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The
year ending 31st December 2022 for product A.
Annual Fixed Costs | K270,000.00 |
Variable costs per unit | K90.00 |
Contribution to sales ratio(C/S) | 75% |
Annual budget units | 1,500 |
Required:
a) Calculate the contribution per unit for Product A.
b) Calculate the Unit Selling Price for Product A.
c) Calculate the Break Even Point for Product A.
d) Calculate the margin of safety in Units and in percentage terms.
e) If the Selling Price per Unit is reduced by 10%, variable cost per Unit is increased to K100.00
and Fixed costs remain unchanged, calculate:
i. The new Breakeven Point.
ii. | The total units that should be sold in order to make a profit of K450,000 in 2020. ( |
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