Question 2 Kerry Furniture Ltd is a firm based in Birmingham. The company is famous for manufacturing mattresses, one of which is a luxury mattress. As a management consultant, you have been hired to review the profitability of manufacturing and selling the luxury mattress. The costs for each mattress are as follows: Direct materials per mattress 300 Direct labour cost per mattress (each mattress takes 5 hours) 100 Other variable manufacturing costs per mattress 150 Annual fixed costs 700,000 Demand for the luxury mattress is growing and the company expects to produce and sell 2,450 units at a selling price of £900 per mattress, next year. Required The managing director of the company has requested you to calculate the following information to present in the next board meeting. a) The contribution per unit and the breakeven point in unit sales and revenue (£). b) The margin of safety in percentage and unit terms. c) The number of units to be sold to make a profit of £220,000.

Question 2 Kerry Furniture Ltd is a firm based in Birmingham. The company is famous for manufacturing mattresses, one of which is a luxury mattress. As a management consultant, you have been hired to review the profitability of manufacturing and selling the luxury mattress. The costs for each mattress are as follows: Direct materials per mattress 300 Direct labour cost per mattress (each mattress takes 5 hours) 100 Other variable manufacturing costs per mattress 150 Annual fixed costs 700,000 Demand for the luxury mattress is growing and the company expects to produce and sell 2,450 units at a selling price of £900 per mattress, next year. Required The managing director of the company has requested you to calculate the following information to present in the next board meeting. a) The contribution per unit and the breakeven point in unit sales and revenue (£). b) The margin of safety in percentage and unit terms. c) The number of units to be sold to make a profit of £220,000.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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