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Question: Question # 4
Gullever Engineering Ltd,
manufactures lathe machines. Its
budget data for next year...
Question # 4
Gullever Engineering Ltd, manufactures lathe machines. Its
budget data for next year is as under:
Rs.
Sales (2,000
units)
8,000,000
Variable
cost
3,000,000
Contribution
margin
5,000,000
Fixed
cost
2,000,000
Operating
income
3,000,000
Required:
i. Calculate breakeven point in units and
amount.
ii. Calculate margin of safety in units and
amount
Question # 5
Normal annual capacity of Karachi Company is 200,000 units and
the sales price is Rs.32 per unit. Unit cost
of components is as
under:
Variable cost per unit
(Rs.) Fixed
Cost(Rs.)
Direct
material
9.00
--
Direct
labour
10.0
--
Factory
overhead
2.00
400,000
Non-manufacturing
cost
3.00
100,000
Total
cost
24.0
500,000
Required:
i. Calculate the breakeven point in rupees and in units. Prove
your answer.
ii. Compute amount of sales required to earn a profit of
Rs.420,000. Prove
Expert Answer
Anonymous
answered this
4) sales price per unit = 8000000/2000= 4000
Variable cost per unit = 3000000/2000= 1500
Contribution per unit = S.P-VC =4000-1500=2500
Breakeven point in units = fixed cost/contribution per unit
= 2000000/2500
= 800 units
Breakeven points in sales = units * S.P
=800*4000
=3200000
Margin if safety in units = total units sold - break-even
sale
=2000-800
=1200
The margin of safety in sales = 1200*4000
= 4800000
5) S.P per unit = 32
Variable cost = direct material + direct labour
=10+9=19
Contribution per unit = 32-19 =13
Break-even in units =fixed cost/ contribution per unit 500000/13
= 38462 units
Break-even in sales =38462*32 = 1230784
Justification
Sale revenue = 1230784 (as calculated above)
Less:- Variable cost = 730778 (38462*19)
Less fixed cost = 500000
Profit = 0 (hence proved) (diff due to rounding off)
b) sales required to earn desire profit = fixed cost + desired
profit/contribution per unit
= 500000+420000/13
=70770 units
Sales =70770*32= 2264640
Justification
Sales =2264640 (as calculated above)
Less variable cost 1344630(70770*19)
Less fixed cost 500000
Profit = 420000(hence proved) ( diff due to rounding off)
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