FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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
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
Expert Solution
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Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step 1: Define break even point
VIEW Step 2: Calculation of Break Even Point in Unit
VIEW Step 3: Calculation of New Break Even Point
VIEW Step 4: Explain the reason of difference in break even point
VIEW Step 5: Describe three categories of inventory
VIEW Step 6: Describe Cost behavior
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