FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question 5
ABC Ltd sells a product that has a price of GH¢8.00 per unit, variable manufacturing cost of
GH 4.00 per unit. ABC Company has a fixed manufacturing cost of GH¢150,000 and fixed
general, selling and administrative expenses of GH¢50,000.
You are required to answer the following questions as the management accountant of ABC Ltd.
a. How many units does ABC Company have to sell to breakeven?
b. How many units does ABC Company have to sell to earn an operating income of
GH$200,000?
c.
d. What sales revenue must ABC Company achieve to breakeven?
e. What sales revenue must ABC Company achieve to earn an operating income of
GH$200,000?
Suppose ABC expects to sell 300,000 units, what is the margin of safety? How do you
explain your result?
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Transcribed Image Text:Question 5 ABC Ltd sells a product that has a price of GH¢8.00 per unit, variable manufacturing cost of GH 4.00 per unit. ABC Company has a fixed manufacturing cost of GH¢150,000 and fixed general, selling and administrative expenses of GH¢50,000. You are required to answer the following questions as the management accountant of ABC Ltd. a. How many units does ABC Company have to sell to breakeven? b. How many units does ABC Company have to sell to earn an operating income of GH$200,000? c. d. What sales revenue must ABC Company achieve to breakeven? e. What sales revenue must ABC Company achieve to earn an operating income of GH$200,000? Suppose ABC expects to sell 300,000 units, what is the margin of safety? How do you explain your result?
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