Unicorn Enterprises produces two strategy games, Mystical Wars, and Magical Dragons. The projected income for the coming year, segmented by product line is as follows: Wars Rs Dragons Rs Total Rs Sales 500,000 800,000 1,300,000 Less: Variable costs 230,000 460,000 690,000 Contribution margin 270,000 340,000 610,000 Less: Direct fixed expenses 120,000 180,000 300,000 Product margin 150,000 160,000 310,000 Less: Common fixed expenses 210,000 Operating income 100,000 The selling prices are Rs. 10 for Mystical Wars and Rs. 20 for Magical Dragons. Required: A) Compute the number of games of each kind that must be sold for Unicorn Enterprises to reach its break-even. B) Compute the revenue that must be earned to produce a net income of 10% of
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Unicorn Enterprises produces two strategy games, Mystical Wars, and Magical Dragons. The projected income for the coming year, segmented by product line is as follows:
| Wars Rs | Dragons Rs | Total Rs | |
| Sales | 500,000 | 800,000 | 1,300,000 |
| Less: Variable costs | 230,000 | 460,000 | 690,000 |
| Contribution margin | 270,000 | 340,000 | 610,000 |
| Less: Direct fixed expenses | 120,000 | 180,000 | 300,000 |
| Product margin | 150,000 | 160,000 | 310,000 |
| Less: Common fixed expenses | 210,000 | ||
| Operating income | 100,000 |
The selling prices are Rs. 10 for Mystical Wars and Rs. 20 for Magical Dragons.
Required:
A) Compute the number of games of each kind that must be sold for Unicorn Enterprises to reach its break-even.
B) Compute the revenue that must be earned to produce a net income of 10% of sales revenue.
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