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Question 3 (a) La Vie Limited sells computer stands. The target profit for the year is $500,000 with a selling price of $200 per unit. The production costs are as follows: Variable cost per unit $160 Annul fixed costs for the year is $800,000 Required: (i) Calculate the breakeven point in units. The sales manager is considering increasing the price to $210 per unit, with an expected increase in sales volume. (ii) Calculate the new breakeven point in units if the selling price is increased

Question 3 (a) La Vie Limited sells computer stands. The target profit for the year is $500,000 with a selling price of $200 per unit. The production costs are as follows: Variable cost per unit $160 Annul fixed costs for the year is $800,000 Required: (i) Calculate the breakeven point in units. The sales manager is considering increasing the price to $210 per unit, with an expected increase in sales volume. (ii) Calculate the new breakeven point in units if the selling price is increased

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following are the unadjusted ledger balances of La Vie Limited for the year ended 31 December 2023: Ordinary Share Capital Sales Trade payables Returns Outwards Purchases Returns Inwards Carriage outwards Carriage inwards Rental expense Insurance expense Sales and Marketing Office salaries expense Cash at Bank Opening Inventory at 1st January 2023 Trade Receivables Plant and Machinery at cost Accumulated Depreciation (1st January 2023: Plant and Machinery) Motor Vehicles at cost Rental expense owing as at 31 December 2023 Depreciation for the year - Plant and Equipment Depreciation for the year - Motor Vehicles Income Statements for the year ended 31 December 2023 La Vie Limited Mikie Limited Sales Cost of goods sold Additional information needed for year-end adjustments, are as follows: Insurance for January 2024 $800 Closing Inventory, at 31 December 2023 $3,500 Irrecoverable debts to be written off $350 $11,000 10% using straight line method 18% on cost Gross profit Less: Operating expenses Net Profit The following information of La Vie Limited and its competitor Mikie Limited is given below: $000 100,000 (55,000) 45,000 (18,000) 27,000 Closing Inventory Trade receivables Cash 400,000 480,000 17,880 720 176,000 480 880 500 $000 80,000 (40,000) 40,000 (12,000) 28,000 $000 19,000 8,920 3,280 64,000 21,000 25,640 20,000 32,700 7,400 40,000 400,000 40,000 150,000 Extract of the assets of both the companies are provided as at 31 December 2023 La Vie Limited Mikie Limited $000 6,000 4,300 1,015
Transcribed Image Text:The following are the unadjusted ledger balances of La Vie Limited for the year ended 31 December 2023: Ordinary Share Capital Sales Trade payables Returns Outwards Purchases Returns Inwards Carriage outwards Carriage inwards Rental expense Insurance expense Sales and Marketing Office salaries expense Cash at Bank Opening Inventory at 1st January 2023 Trade Receivables Plant and Machinery at cost Accumulated Depreciation (1st January 2023: Plant and Machinery) Motor Vehicles at cost Rental expense owing as at 31 December 2023 Depreciation for the year - Plant and Equipment Depreciation for the year - Motor Vehicles Income Statements for the year ended 31 December 2023 La Vie Limited Mikie Limited Sales Cost of goods sold Additional information needed for year-end adjustments, are as follows: Insurance for January 2024 $800 Closing Inventory, at 31 December 2023 $3,500 Irrecoverable debts to be written off $350 $11,000 10% using straight line method 18% on cost Gross profit Less: Operating expenses Net Profit The following information of La Vie Limited and its competitor Mikie Limited is given below: $000 100,000 (55,000) 45,000 (18,000) 27,000 Closing Inventory Trade receivables Cash 400,000 480,000 17,880 720 176,000 480 880 500 $000 80,000 (40,000) 40,000 (12,000) 28,000 $000 19,000 8,920 3,280 64,000 21,000 25,640 20,000 32,700 7,400 40,000 400,000 40,000 150,000 Extract of the assets of both the companies are provided as at 31 December 2023 La Vie Limited Mikie Limited $000 6,000 4,300 1,015
Question 3 (a) La Vie Limited sells computer stands. The target profit for the year is $500,000 with a selling price of $200 per unit. The production costs are as follows: Variable cost per unit $160 Annul fixed costs for the year is $800,000 Required: (i) Calculate the breakeven point in units. The sales manager is considering increasing the price to $210 per unit, with an expected increase in sales volume. (ii) Calculate the new breakeven point in units if the selling price is increased to $210 per unit. (iii) Briefly explain the reason for the difference in breakeven point before and after the increase in the selling price of the computer stands. (b) Describe the three categorises of inventories found in manufacturing companies. (c) Listed below are the two types of cost behaviour, you are required to define each type of cost behaviours. (i) Fixed Costs (ii) Variable Costs
Transcribed Image Text:Question 3 (a) La Vie Limited sells computer stands. The target profit for the year is $500,000 with a selling price of $200 per unit. The production costs are as follows: Variable cost per unit $160 Annul fixed costs for the year is $800,000 Required: (i) Calculate the breakeven point in units. The sales manager is considering increasing the price to $210 per unit, with an expected increase in sales volume. (ii) Calculate the new breakeven point in units if the selling price is increased to $210 per unit. (iii) Briefly explain the reason for the difference in breakeven point before and after the increase in the selling price of the computer stands. (b) Describe the three categorises of inventories found in manufacturing companies. (c) Listed below are the two types of cost behaviour, you are required to define each type of cost behaviours. (i) Fixed Costs (ii) Variable Costs
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