QUESTION SIX a) Style Industries Ltd is specialised in making chairs. The fixed costs of...
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QUESTION SIX a) Style Industries Ltd is specialised in making chairs. The fixed costs of operating the workshop for a month total K130,000. Each chair requires materials that cost K131. A chair takes one hour to make, and the company pays the workers K139 an hour. The workers are all on contracts such that if they do not work for any reason, they are not paid. The chairs are sold to the public for K560 per chair. The budgeted sales and production are 1300 chairs per month i) Using the marginal approach, calculate the budgeted profit (or loss) for the year. (4marks) ii) Calculate the annual breakeven point (in units). (2marks) iii) Calculate the breakeven revenue. (I marks) iv) Calculate the number of units needed to be sold to achieve a target profit of K1million per year. (2marks) v) Calculate the margin of safety in percentage (%). (2 marks) vi) Discuss the usefulness or importance of knowing the breakeven point by managers. (4 marks) b) Explain any two (2) ways in which KKL Ltd may protect itself against foreign currency risk. (4 marks) c) Explain the benefits of budgeting to you as a manager of an organisation. (6marks) [Total: 25 marks nn
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