Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below: Budgeted sales 10,000 units £ £ Sales 2,000,000 Direct Materials 800,000 Direct Labour 400,000 Fixed Overheads 500,000 Total costs 1,700,000 Total Profit 300,000 Required: a) Produce a profit statement for the year ending 31 December 2012, assuming actual sales are 12,000 units. b) Calculate the break-even point for the year ending 31 December 2012 and the margin of safety expressed as a percentage of the original budgeted sales. c) Calculate the revised breakeven point if a new wage settlement increases direct labour costs by 20%.
Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below:
Budgeted sales 10,000 units
£ £ Sales 2,000,000
Direct Materials 800,000
Direct Labour 400,000
Fixed
Total costs 1,700,000
Total Profit 300,000
Required:
a) Produce a profit statement for the year ending 31 December 2012, assuming actual sales are 12,000 units.
b) Calculate the break-even point for the year ending 31 December 2012 and the margin of safety expressed as a percentage of the original budgeted sales.
c) Calculate the revised breakeven point if a new wage settlement increases
direct labour costs by 20%.
d) Assuming sales of 10,000 units are achieved, and the new wage settlement is never agreed, calculate the selling price per unit that would earn a total profit of £500,000.
e) Discuss the limitations of breakeven analysis.
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Assuming sales of 10,000 units are achieved, and the new wage settlement is never agreed, calculate the selling price per unit that would earn a total profit of £500,000.
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