Q3. Martinez limited is a manufacturing company based in Martinez district, Lusaka province. It manufactures a product called “JUNTA SPARK”. Below is the data relating to JUNTA SPARK:Per Unit (K)Selling priceDirect materialsDirect Labour costVariable overheadFixed overhead costThe total fixed cost per period was K60 million. The company has budgeted to sell 12,000 units of JUNTA SPARK for the period.Required:(i) (ii) (iii)(iv) (v)2,000Calculate the Break Even Point (B.E.P) in units and in sales valueCalculate the Margin of safety (MOS) in units and percentageCalculate the number of units to be produced if the company is targeting a profit ofK1.2 million The Break Even Point in units if the selling price dropped by 5% but other variablesremained constantState four major limitations of Cost Volume Profit (CVP) Analysis Martinez limited is a manufacturing company based in Martinez district, Lusaka province. Itmanufactures a product called “JUNTA SPARK”. Below is the data relating to JUNTASPARK:Selling priceDirect materialsDirect Labour costVariable overheadFixed overhead costThe total fixed cost per period was K60 million. The company has budgeted to sell 12,000units of JUNTA SPARK for the period.Required:(i)(ii)(iii)(iv)Per Unit (K)24,0008,0005,000(v)3,0002,000Calculate the Break Even Point (B.E.P) in units and in sales valueCalculate the Margin of safety (MOS) in units and percentageCalculate the number of units to be produced if the company is targeting a profit ofK1.2 millionThe Break Even Point in units if the selling price dropped by 5% but other variablesremained constantState four major limitations of Cost Volume Profit (CVP) Analysis

Answered: Martinez limited is a manufacturing…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Q3. Martinez limited is a manufacturing company based in Martinez district, Lusaka province. It manufactures a product called “JUNTA SPARK”. Below is the data relating to JUNTA SPARK: Per Unit (K) Selling price Direct materials Direct Labour cost Variable overhead Fixed overhead cost The total fixed cost per period was K60 million. The company has budgeted to sell 12,000 units of JUNTA SPARK for the period. Required: (i) (ii) (iii) (iv) (v) 2,000 Calculate the Break Even Point (B.E.P) in units and in sales value Calculate the Margin of safety (MOS) in units and percentage Calculate the number of units to be produced if the company is targeting a profit of K1.2 million The Break Even Point in units if the selling price dropped by 5% but other variables remained constant State four major limitations of Cost Volume Profit (CVP) Analysis

Martinez limited is a manufacturing company based in Martinez district, Lusaka province. It
manufactures a product called “JUNTA SPARK”. Below is the data relating to JUNTA
SPARK:
Selling price
Direct materials
Direct Labour cost
Variable overhead
Fixed overhead cost
The total fixed cost per period was K60 million. The company has budgeted to sell 12,000
units of JUNTA SPARK for the period.
Required:
(i)
(ii)
(iii)
(iv)
Per Unit (K)
24,000
8,000
5,000
(v)
3,000
2,000
Calculate the Break Even Point (B.E.P) in units and in sales value
Calculate the Margin of safety (MOS) in units and percentage
Calculate the number of units to be produced if the company is targeting a profit of
K1.2 million
The Break Even Point in units if the selling price dropped by 5% but other variables
remained constant
State four major limitations of Cost Volume Profit (CVP) Analysis

Expert Solution

Step 1: Introduction to CVP analysis

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CVP analysis, or cost-volume-profit analysis, is a management accounting technique used to analyze the relationship between sales volume, costs, and profits. CVP analysis helps businesses to understand how changes in sales volume, costs, and pricing affect their profitability and to make better decisions in managing their operations.