Question 2 Gulp Ltd retails two products: A and B. The budgeted income statement for the next period is as follows: - A В Total Units sold 150,000 50,000 200,000 Sales revenues A: RM25 p/unit & B: RM35 p/unit RM3,750,000 RM1,750,000 RM5,500,000 Variable costs A: RM14 p/unit & B: RM18 p/unit RM2,100,000 RM 900,000 Contribution margins A: RM11 p/unit & B: RM17 p/unit RM1,650,000 RM 850,000 RM2,500,000 Fixed costs RM3,000,000 RM1.500.000 RM1.000.000 Operating income Required: (a) () For the two products, compute the breakeven point in batches and units with the planned sales mix above. (i) Compute the profit-volume ratio for A and B. (iii)Compute the margin of safety (in units) for A and B. (b) Suppose 200,000 units are sold but only 20,000 of them are A. O Compute the operating income (ii) Now recalculate the breakeven point in batches and units (ii)Compare your answer in (b)(iï) with (a)(1). What conclusion can you make here? ww (c) Explain TWO (2) assumptions on which the cost-volume-profit analysis is based.
Question 2 Gulp Ltd retails two products: A and B. The budgeted income statement for the next period is as follows: - A В Total Units sold 150,000 50,000 200,000 Sales revenues A: RM25 p/unit & B: RM35 p/unit RM3,750,000 RM1,750,000 RM5,500,000 Variable costs A: RM14 p/unit & B: RM18 p/unit RM2,100,000 RM 900,000 Contribution margins A: RM11 p/unit & B: RM17 p/unit RM1,650,000 RM 850,000 RM2,500,000 Fixed costs RM3,000,000 RM1.500.000 RM1.000.000 Operating income Required: (a) () For the two products, compute the breakeven point in batches and units with the planned sales mix above. (i) Compute the profit-volume ratio for A and B. (iii)Compute the margin of safety (in units) for A and B. (b) Suppose 200,000 units are sold but only 20,000 of them are A. O Compute the operating income (ii) Now recalculate the breakeven point in batches and units (ii)Compare your answer in (b)(iï) with (a)(1). What conclusion can you make here? ww (c) Explain TWO (2) assumptions on which the cost-volume-profit analysis is based.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
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Transcribed Image Text:Question 2
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Question 2
Gulp Ltd retails two products: A and B. The budgeted income statement for the next period
is as follows: -
A
В
Total
Units sold
150,000
50,000
200,000
Sales revenues
A: RM25 p/unit & B: RM35 p'unit RM3,750,000 RM1,750,000
RM5,500,000
Variable costs
A: RM14 p'unit & B: RM18 p/unit RM2,100,000 RM 900,000
Contribution margins
A: RM11 p/unit & B: RM17 p'unit RM1,650,000 RM 850,000
Fixed costs
RM3,000,000
RM2,500,000
RM1.500.000
RML000.000
Operating income
Required:
(a) () For the two products, compute the breakeven point in batches and units with the
planned sales mix above.
(ii) Compute the profit-volume ratio for A and B.
(ii)Compute the margin of safety (in units) for A and B.
(b) Suppose 200,000 units are sold but only 20,000 of them are A.
O Compute the operating income
(i) Now recalculate the breakeven point in batches and units
(ii)Compare your answer in (b)(ii) with (a)(;). What conclusion can you make here?
ww
(c) Explain TWO (2) assumptions on which the cost-volume-profit analysis is based.
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