Explain THREE limiting assumptions of cost volume profit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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B. Explain THREE limiting assumptions of cost volume profit.
C. Roose manufactures a product called Wye. The owners of Roose are preparing the budgets for the three months ending December 2020. Expected sales in units are shown below.
|
October 2020 |
November 2020 |
December 2020 |
January 2021 |
Units of Wye |
5,700 units |
6,080 units |
6,384 units |
4,788 units |
One completed Wye contains 3.40 kg of material, costing RM 9.30 per kg.
|
Inventory as at 1 Oct 2020 |
Inventory decision |
Finished product (units) of Wye |
1,425 units |
Closing inventory in any month should represent 25% of the next month’s expected sales |
Material (kg) |
25,000 kg |
This is to be reduced at a constant rate to 16, 000 kg by the end of December 2020 |
Required:
- Prepare for each of the months October to December 2020, the Production Budget for finished products Wye.
- Prepare, for each of the months October to December 2020, the Materials Purchases Budget.
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