INFORMATION The Salmon Ltd manufactures and sells fishing rods for R600 each. The budgeted sales for 2023 are 22 000 rods and the costs are expected to be as follows: Direct manufacturing costs per unit..........................................R200 Variable manufacturing overheads cost per unit.......................R50 Variable administration costs per unit.......................................R40 Sales commission.....................................................................10% of sales Fixed manufacturing costs........................................................R1 800 000 Fixed administration and selling costs......................................R600 000 Use the information provided to answer the following questions independently: 1. Calculate the margin of safety (expressed in units). 2.Use the marginal income ratio to determine the break-even value if the direct manufacturing costs are R10 per unit more than expected. 3. Calculate the total Marginal Income and Net Profit/Loss if the sales volume for 2023 is 20% below the budgeted quantity. 4.Calculate the number of units that must be sold to earn a net profit of R150 per unit. 5. Calculate the break-even quantity if the selling price is reduced by R50 per unit and the fixed manufacturing costs decrease by R22 000.
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.
INFORMATION
The Salmon Ltd manufactures and sells fishing rods for R600 each. The budgeted sales for 2023 are 22 000 rods and the costs are expected to be as follows:
Direct
Variable manufacturing
Variable administration costs per unit.......................................R40
Sales commission.....................................................................10% of sales
Fixed manufacturing costs........................................................R1 800 000
Fixed administration and selling costs......................................R600 000
Use the information provided to answer the following questions independently:
1. Calculate the margin of safety (expressed in units).
2.Use the marginal income ratio to determine the break-even value if the direct manufacturing costs are R10 per unit more than expected.
3. Calculate the total Marginal Income and Net
4.Calculate the number of units that must be sold to earn a net profit of R150 per unit.
5. Calculate the break-even quantity if the selling price is reduced by R50 per unit and the fixed manufacturing costs decrease by R22 000.
Step by step
Solved in 7 steps
