List four (4) key assumptions underlying a multiproduct break-even analysis, and discuss how realistic they are in this case. Rozar Ltd (RL) specialises in the manufacturer of luxury fumiture for the gaming market. It isconsidering launching a new range of furniture. Based on market research performed, thecompany has estimated the following:Selling priceUnitsGaming chair2,800Message chair3,200420Standing Desk3,600380400Estimated production costs per unit:Gaming chair ($) Message chair ($) Standing Desk ($)Material300400500Labour800900975Variable overhead220220245Fixed overhead353540There are the following additional information:Labour costs are split into 40% variable and 60% fixed.Fixed overheads are absorbed on the basis of units produced.All fixed costs are incremental, i.e. if any of the new range of products islaunched, all of the fixed costs would be incurred for the whole range.The management of RL would like to know if the new range will breakeven prior to committingto production.

In Marginal Costing we calculate contributionmargin by deducting variable costs from sales.…

Rozar Ltd (RL) specialises in the manufacturer of luxury furniture for the gaming market. It is considering launching a new range of funiture. Based on market research performed, the company has estimated the following: Selling price Units Gaming chair 2,800 380 Message chair 3.200 420 Standing Desk 3,600 400 Estimated production costs per unit: Gaming chair (S) Message chair ($) Standing Desk ($) Material 300 400 900 500 975 Labour S00 Variable overhead Fixed overhead 220 220 245 35 35 40 There are the following additional information: Labour costs are split into 40% variable and 60% fixed. Fixed overheads are absorbed on the basis of units produced. All fixed costs are incremental, ie. if any of the new range of products is launched, all of the fixed costs would be incurred for the whole range. The management of RL would like to know if the new range will breakeven prior to committing to production.

Rozar Ltd (RL) specialises in the manufacturer of luxury furniture for the gaming market. It is considering launching a new range of funiture. Based on market research performed, the company has estimated the following: Selling price Units Gaming chair 2,800 380 Message chair 3.200 420 Standing Desk 3,600 400 Estimated production costs per unit: Gaming chair (S) Message chair ($) Standing Desk ($) Material 300 400 900 500 975 Labour S00 Variable overhead Fixed overhead 220 220 245 35 35 40 There are the following additional information: Labour costs are split into 40% variable and 60% fixed. Fixed overheads are absorbed on the basis of units produced. All fixed costs are incremental, ie. if any of the new range of products is launched, all of the fixed costs would be incurred for the whole range. The management of RL would like to know if the new range will breakeven prior to committing to production.

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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