ML sells three products: Good, Better and Best. The market for the products dictates that the number of products sold are always in the ratio of 3Good:4Better:5Best. Budgeted sales volume and prices, and cost details for the previous period were as follows: Good Better Best Sales units 300 400 500 Selling price per unit GHS80 GHS55 GHS70 Contribution to sales ratio 70% 65% 50% The budgeted total fixed costs for the period were GHS31,200 Required: Calculate for that period: (i) The break-even sales revenue. (ii) The volume of each product that would have needed to be sold if the company had wanted to earn a profit of GHS29,520 in that period.
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.
) ML sells three products: Good, Better and Best. The market for the products dictates that the number of products sold are always in the ratio of 3Good:4Better:5Best. Budgeted sales volume
and prices, and cost details for the previous period were as follows:
|
|
Good |
Better |
Best |
|
Sales units |
300 |
400 |
500 |
|
Selling price per unit |
GHS80 |
GHS55 |
GHS70 |
|
Contribution to sales ratio |
70% |
65% |
50% |
The budgeted total fixed costs for the period were GHS31,200
Required:
Calculate for that period:
(i) The break-even sales revenue.
(ii) The volume of each product that would have needed to be sold if the company had wanted to earn a profit of GHS29,520 in that period.
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