FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A company manufactures computer games. The games are in demand all year round and in the
next financial year the sales manager plans to sell 12,000 games. The trainee’s
accountant
price is £10.00, and the variable cost will consist of direct, materials £1 .00 per unit, direct labour
cost £5.00 per unit. The fixed cost for the year is expected to be £32,000.
Required:
You have been asked to provide information that will help the managing director consider the
effect on profitability changes in the level of sales activity next year.
a. Draw up a marginal statement that calculates the contribution per unit.
b. Draw up a marginal cost statement on the basis that 12,000 units will be sold and calculate the
net profit or loss.
c. Briefly explain what is meant by breakeven points.
d. Calculate the breakeven units in value and explain what it means to the director.
e. Calculate the sales activity to reach a target profit of £20,000.
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