Problem 9

selling price per unit 12.5

direct material per unit 5
direct labour per unit 3
mfg overhead per unit 1
selling and admin per unit 0.25
admin and other overhead value 80000
selling and administrative value 35000
installed capacity units 200000
budgeted productions and sales units 100000

income statement- gross margin method

sales 1250000
less:
cost of good sold
direct material 500000
direct labour 300000
mfg overhead 100000
cogs 900000
gross margin 350000
gross margin % 28
selling and admin 60000
admin and other overhead 80000
net margin 210000
net margin% 16.8
new budgeted production and sales 100000 150000 200000

income statement- contribution method

per unit value
sales 12.5 1250000 12.5 1875000 12.5 2500000
less:
Varibale expenses
direct material 5.00 500000 5.00 750000 5.00 1000000
direct labour 3.00 300000 3.00 450000 3.00 600000
mfg overhead 1.00 100000 1.00 150000 1.00 200000
selling and admin 0.25 25000 0.25 37500 0.25 50000
total varibale cost 9.25 925000 9.25 1387500 9.25 1850000
contribution 3.25 325000 3.25 487500 3.25 650000
contribuiton % 26 26 26
fixed cost
admin and other overhead 0.80 80000 0.53 80000 0.40 80000
selling and administrative 0.35 35000 0.23 35000 0.18 35000
total fixed cost 1.15 115000 0.77 115000 0.58 115000
net margin 2.10 210000 2.48 372500 2.68 535000
net margin % 16.8 19.86667 21.4

Break even Level ( no of units) 35385 35385 35385

Break even Level (Value) 442308 442308 442308
Break even as % of capacity ( Units) 17.7 17.7 17.7
Break even % in value terms 17.7 17.7 17.7
Margin of safety (Volumes) 164615 164615
Margin of safety (%) 82.30% 82.30% 82.30%