Managerial Accounting
15th Edition
ISBN: 9780078025631
Author: Ray H Garrison, Eric Noreen, Peter C. Brewer Professor
Publisher: McGraw-Hill Education
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Chapter AB, Problem 2E
To determine
Profitability: The profitability also known as return on sales represents the net profit earned as a percentage of the total turnover.
Margin: Margin means the net profit earned by the business.
Revenue: Revenue represents the total sales turnover of the business in a given period.
With reference to the details given in the question, determine the following −
- Is there sufficient capacity to satisfy demand of all products
- The optimal production for the year
- The total contribution margin for the production plan proposed
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Note: The expanded contribution margin model MUST be used to answer all the questions.
3.1
REQUIRED
Use the information provided below to answer the following questions:
3.1.1
Calculate the total revenues at break-even (without using the contribution margin ratio)
if the sales manager's proposal is rejected.
(4 marks)
If the sales manager's proposal is accepted, calculate the following:
3.1.2
3.1.3
The additional expenditure that the company can afford on advertising
The break-even quantity
(4 marks)
(4 marks)
(4 marks)
3.1.4 The selling price per unit that will enable the company to break-even.
INFORMATION
Yippy Limited manufactures a product that sells for R180 each. The company presently produces and sells
90 000 units per year. The unit variable manufacturing costs and selling costs are R90 and R18 respectively.
Fixed costs are R4 536 000 for manufacturing overheads and R1 944 000 for selling and administrative
activities.
The sales manager has proposed that the selling price be…
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Profitability index; Author: The Finance Storyteller;https://www.youtube.com/watch?v=Md5ocNqKHq8;License: Standard Youtube License