Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in. The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021. The company plans to sell each bottle of Kev-Power at Shs.198. The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in. The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021. The company plans to sell each bottle of Kev-Power at Shs.198. The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in. The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021. The company plans to sell each bottle of Kev-Power at Shs.198. The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in.
The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021.
The company plans to sell each bottle of Kev-Power at Shs.198.
The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Variable Costs Per Bottle Produced
Direct Material Cost
Shs 6 per Bottle
Direct Labour Cost
Shs 3 per Bottle
Variable Production overhead cost
Shs 3.8 per Bottle
Variable Administration overhead cost
Shs 2.5 per Bottle
Variable Selling & Distribution overhead cost
Shs 1.5 per Bottle
4.The Fixed costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Fixed Cost Total for the entire Year 2021:
Fixed Production overhead cost
4,100,000
Fixed Administration overhead cost
3,900,000
Fixed Selling & Distribution overhead cost
350,000
Rent Cost
300,000
Required:
Calculate the break-even both in units and sales value using the contribution margin method for Kev-Power for the year 2021
Calculate the number of Units (Kev-Power bottles) that the Kevian ltd will have to produce and sell to earn a target profit of Shs 45,000,000.
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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