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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question

Transcribed Image Text:QUESTION 3
REQUIRED
Use the information provided below to answer the following questions independently:
3.1 Calculate the margin of safety (expressed in units).
3.2 Use the marginal income ratio to determine the break-even value if the direct manufacturing
costs are R10 per unit more than expected.
3.3 Calculate the total Marginal Income and Net Profit/Loss if the sales volume for 2023 is 20%
below the budgeted quantity.
3.4 Calculate the number of units that must be sold to earn a net profit of R150 per unit.
3.5 Calculate the break-even quantity if the selling price is reduced by R50 per unit and the
fixed manufacturing costs decrease by R22 000.
INFORMATION
The Salmon Ltd manufactures and sells fishing rods for R600 each. The budgeted sales for 2023 are 22 000
rods and the costs are expected to be as follows:
Direct manufacturing costs per unit
Variable manufacturing overheads cost per unit
Variable administration costs per unit
Sales commission
Fixed manufacturing costs
Fixed administration and selling costs
R
R200
R50
R40
10% of sales
R1 800 000
R600 000
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- Assume that a company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Number of units to be produced and sold each year Unit product cost Estimated annual selling and administrative expenses Estimated investment required by the company Desired return on investment (ROI) What is the markup percentage on absorption cost required to achieve the desired ROI? 15,000 30 $ $81,900 $780,000 12%arrow_forwardNow suppose that annual unit sales, variable cost, and unit price are equal to their respective expected values—that is, there is no uncertainty. Determine the company's annual profit for this scenario. Round answer to a whole number, if needed.$arrow_forward3) If demand for 2022 is instead 2,500 units should the company pay to increase their capacity? Why? Please explain your calculations and reference to the chart in Figure 1. Assume units are sold at the normal price. Please mention the concept of incremental profits. Hint: If you expand capacity, you will have to pay additional fixed costs of $25,000. Remember that fixed costs are fixed within the relevant range. If you expand capacity then you are outside this range. If you expand capacity then you can make revenue on 500 additional units at the normal price and would pay variable costs on 500 additional units. Please consider the incremental profit or loss of expanding capacity. The incremental profit is the increase in revenues minus the increase in costs of adding 500 more units. If the incremental profit of expanding capacity is positive then you should do so.arrow_forward
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