Question 2 Kosova Itd is a new formed firm which intends to penetrate in the international market. The newly formed firm produces car radios, which currently it sells to car manufacturers for £60 each. Next year the business plans to make and sell 20,000 radios. The business's costs are as follows: Manufacturing Variable materials £20 per radio £14 per radio £12 per radio Variable labour Other variable costs Fixed cost £80,000 per year Administration and selling £3 per radio £60,000 per year Variable Fixed Required: (a) Calculate the break-even point for next year, expressed both in quantity of radios and sales value. (b) Calculate the operating leverage for next year, and discuss why operating leverage is useful. value.

Question 2 Kosova Itd is a new formed firm which intends to penetrate in the international market. The newly formed firm produces car radios, which currently it sells to car manufacturers for £60 each. Next year the business plans to make and sell 20,000 radios. The business's costs are as follows: Manufacturing Variable materials £20 per radio £14 per radio £12 per radio Variable labour Other variable costs Fixed cost £80,000 per year Administration and selling £3 per radio £60,000 per year Variable Fixed Required: (a) Calculate the break-even point for next year, expressed both in quantity of radios and sales value. (b) Calculate the operating leverage for next year, and discuss why operating leverage is useful. value.

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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