Question 2 Two companies. The North and South sell the same type of product in the same type of market. Their budgeted profit and loss account for the year ended 31st March, 2018 were as follows: North South Sales 75,000 75,000 Variable cost 60,000 50,000 Fixed Cost 7,500 17, 500 67,500 67,500 Net Profit 7,500 7,500 You are required to: a. Calculate the break-even sales revenue of each enterprise b. State with reason which business is likely to earn greater profit in conditions of į. Heavy demand for the product and ii. Low demand for the product. c. If North Company increases its capacity by 40% and this increased fixed cost by $2,000 per annum, at what sales revenue will it make the same Net Profit as before?
Question 2 Two companies. The North and South sell the same type of product in the same type of market. Their budgeted profit and loss account for the year ended 31st March, 2018 were as follows: North South Sales 75,000 75,000 Variable cost 60,000 50,000 Fixed Cost 7,500 17, 500 67,500 67,500 Net Profit 7,500 7,500 You are required to: a. Calculate the break-even sales revenue of each enterprise b. State with reason which business is likely to earn greater profit in conditions of į. Heavy demand for the product and ii. Low demand for the product. c. If North Company increases its capacity by 40% and this increased fixed cost by $2,000 per annum, at what sales revenue will it make the same Net Profit as before?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Question 2
Two companies. The North and South sell the same type of product in the same type of market.
Their budgeted profit and loss account for the year ended 31st March, 2018 were as follows:
North
South
Sales
75,000
75,000
Variable cost
60,000
50,000
Fixed Cost
7,500
17, 500
67,500
67,500
Net Profit
7,500
7,500
You are required to:
a. Calculate the break-even sales revenue of each enterprise
b. State with reason which business is likely to earn greater profit in conditions of į. Heavy
demand for the product and ii. Low demand for the product.
c. If North Company increases its capacity by 40% and this increased fixed cost by $2,000
per annum, at what sales revenue will it make the same Net Profit as before?
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