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Management Accounting question Auto Robot Ltd which manufactures two products P & Q has provided the following...

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Accounting

Management Accounting question

Auto Robot Ltd which manufactures two products P & Q hasprovided the following information.
P (shs) Q (shs) Selling price per unit 10 12
Variable cost per unit 2 8
Fixed cost 50,000 34,000
Required:-
i) Calculate the B. E. P. of each product in units and inshs.
ii) Calculate the margin of safety if budgeted sales are 10,000units each
iii) Compute the profit of each product if sales in units are 20%above the B. E. P.

Answer & Explanation Solved by verified expert
4.4 Ratings (700 Votes)

Solution

i) Calculation of B. E. P. of each product in units and in shs.
P Q
Selling Price per Unit 10 12
Variable Cost Per Unit 2 8
Contribution Per Unit 8 4
Fixed Cost 50000 34000
Break Even Unit 6250 8500
=50000/8 =34000/4
Break Even Unit(in Shs) 62500 102000
=6250*10 =8500*12
ii) Calculation of margin of safety if budgeted sales are 10,000 units each
P Q
Units 10000 10000
Break Even Unit 6250 8500
Margin of safety Units 3750 1500
=10000-6250 =10000-8500
Margin of safety in shs 37500 18000
=3750*10 =1500*12
iii) Computation of profit of each product if sales in units are 20% above the B. E. P.
P Q
Break Even Unit 6250 8500
Sale Unit 7500 10200
=6250*1.20 =8500*1.20
Contribution (a) 60000 40800
=7500*8 =10200*4
Fixed Cost (b) 50000 34000
Profit in shs(a-b) 10000 6800

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