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Question 3 Basic CBP relationships: Manufacturer

Divine DVD's Ltd manufactures and sells DVDs. Price and cost data are as follows:

In the following requirements ignore income taxes

Required:

  1. What is Divine DVD's break-even point in units?

  2. What is the company's break-even point in sales value (kina).

  3. How many units would Divine DVDs have to sell in order to earn a profit of K260 000?

  4. What is the firm's safety margin?

  5. Management estimate that direct labour costs will increase by 8 per cent next year. How many units will the company have to sell next year to reach its break-even point?

  6. If Divine DVDs' direct labour costs do increase by 8 per cent, what selling price per unit of product must it charge to maintain the same contribution margin ration?

Question 4 Basic CVP relationships: income taxes: manufacturer

Refer to the data given in Question 2. Now assume that Divine DVDs pays income taxes of 30 per cent.

Required:

  1. What is Divine DVDs' break-even point in units?

  2. What is the company's break-even point in sales value?

  3. How many units would Divine DVDs gave to sell in order to earn a profit of $300 000 after tax?

  4. What is the firm's safety margin?

  5. If Divine DVDs' direct labour costs increase by 8 per cent, what selling price per unit of product must it charge to maintain the same contribution margin ratio?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M91786194

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