2. Cost and management accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 903 questions
J Limited produces and sells a single product. The budgeted operating statement of the company for the year ending 31 March 2019 is as follows: $000 $000 Sales income (20 000 units) 2 900 Direct materials Direct labour Production overheads (1 480) Gross profit 1 420 Selling overheads (898) Profit for the year The variable production overheads will be $5 per unit. The variable selling overheads will be $10 per unit. REQUIRED Calculate the budgeted contribution per unit. Calculate the budgeted margin of safety in units. Calculate the budgeted margin of safety as a percentage. Additional information The sales manager believes that production and sales can be increased to 25 000 units per year based on the following plan. The company spends $250 000 on an advertising campaign which will last for one year only. The unit selling price is reduced by 15%. The direct material unit cost is reduced by 5%. REQUIRED Prepare statements to calculate the following in the first year if the directors decide to proceed with this plan. the revised budgeted contribution the revised budgeted total profit Additional information If the directors decide to proceed with the sales manager’s plan they would do so for a period of 3 years. If the directors decide not to proceed with the sales manager’s plan they estimate that profit for the years ending 31 March 2019, 31 March 2020 and 31 March 2021 will be $522 000, $322 000 and $220 000 respectively. REQUIRED Advise the directors whether or not they should accept the sales manager’s plan. Justify your answer using both financial and non-financial factors and any relevant calculations. State three assumptions made when using costvolumeprofit (CVP) analysis. State two advantages of using CVP analysis.
9706_w18_qp_23
THEORY
2018
Paper 2, Variant 3
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Questions Discovered
903