Hardaker Limited produces and sells two products. Product A sells for £12 per unit and has a total variable cost of £7.90, while Product B sells for £17 per unit and has a total variable cost of £11.20. For every 4 units of Product A sold, three of product B are sold. Hardaker Limited fixed costs are £131,820 per period. Budgeted sales revenue for the next period is £398,500. Required: (a) Calculate the Breakeven points in Units. (b) Calculate the Margin of Safety in Units (c) Evaluate the relevance of Break-Even Analysis in the modern manufacturing environment.
Hardaker Limited produces and sells two products. Product A sells for £12 per unit and has a total variable cost of £7.90, while Product B sells for £17 per unit and has a total variable cost of £11.20. For every 4 units of Product A sold, three of product B are sold. Hardaker Limited fixed costs are £131,820 per period. Budgeted sales revenue for the next period is £398,500. Required: (a) Calculate the Breakeven points in Units. (b) Calculate the Margin of Safety in Units (c) Evaluate the relevance of Break-Even Analysis in the modern manufacturing environment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Hardaker Limited produces and sells two products.
Product A sells for £12 per unit and has a total variable cost of £7.90, while Product B sells
for £17 per unit and has a total variable cost of £11.20.
For every 4 units of Product A sold, three of product B are sold.
Hardaker Limited fixed costs are £131,820 per period.
Budgeted sales revenue for the next period is £398,500.
Required:
(a) Calculate the Breakeven points in Units.
(b) Calculate the Margin of Safety in Units
(c) Evaluate the relevance of Break-Even Analysis in the modern
manufacturing environment.
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