A summary of a manufacturing company's budgeted profit statement for its next financial year, when it expects to be operating at 75 percent of capacity, is given below: Omani RialOmani Rials Sales 4,500 units at Omani Rials 32 144,000 Less: Direct Materials 27,000 Direct wages 36,000 Production overheads- -Fixed 21,000 -Variable 9,000 (93,000) Gross profit 51,000 Less: Admin., selling and distribution costs: -Fixed 18,000 -Variable 13,500 (31.500) Net profit 19,500 it has been estimated that: i. if the selling price per unit were reduced to Omani Rials 28, the increased demand would utilise 90 percent of the company's capacity without any additional advertising expenditure; ii. to attract sufficient demand to utilise full capacity would require a 15 percent reduction in the current selling price and a Omani Rials 2,500 special advertising campaign. Required: 1. Calculate the breakeven point in units, based on the original budget; 2. Calculate the profits and breakeven points which would result from each of the two alternatives and compare them with the original budget.
A summary of a manufacturing company's budgeted profit statement for its next financial year, when it expects to be operating at 75 percent of capacity, is given below: Omani RialOmani Rials Sales 4,500 units at Omani Rials 32 144,000 Less: Direct Materials 27,000 Direct wages 36,000 Production overheads- -Fixed 21,000 -Variable 9,000 (93,000) Gross profit 51,000 Less: Admin., selling and distribution costs: -Fixed 18,000 -Variable 13,500 (31.500) Net profit 19,500 it has been estimated that: i. if the selling price per unit were reduced to Omani Rials 28, the increased demand would utilise 90 percent of the company's capacity without any additional advertising expenditure; ii. to attract sufficient demand to utilise full capacity would require a 15 percent reduction in the current selling price and a Omani Rials 2,500 special advertising campaign. Required: 1. Calculate the breakeven point in units, based on the original budget; 2. Calculate the profits and breakeven points which would result from each of the two alternatives and compare them with the original budget.
Chapter4: Job Order Costing
Section: Chapter Questions
Problem 7EB: A company estimates its manufacturing overhead will be $840,000 for the next year. What is the...
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Q. 6)
A summary of a manufacturing company's budgeted profit
statement for its next financial year, when it expects to be
operating at 75 percent of capacity, is given below:
Omani RialOmani Rials
Sales 4,500 units at Omani Rials 32
144,000
Less:
Direct Materials
27,000
Direct wages
36,000
Production overheads-
--Fixed
21,000
-Variable
9,000
(93,000)
Gross profit
51,000
Less: Admin., selling and distribution costs:
-----------Fixed
18,000
----------- Variable
13,500
(31,500)
Net profit
19,500
it has been estimated that:
i if the selling price per unit were reduced to Omani Rials 28, the
increased demand would utilise 90 percent of the company's
capacity without any additional advertising expenditure;
ii. to attract sufficient demand to utilise full capacity would require
a 15 percent reduction in the current selling price and a Omani
Rials 2,500 special advertising campaign.
Required:
1. Calculate the breakeven point in units, based on the original
budget;
2. Calculate the profits and breakeven points which would result
from each of the two alternatives and compare them with the
original budget.
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