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Riley Ltd has made the following estimates for the next month:

Selling Price £25 per unit
Variable Cost £10 per unit
Fixed Costs £300,000
Forecast Output 30,000 units
Maximum Output 40,000 units

Calculate:

a. The profit volume ratio
b. The break even point in units
c. The break even point in sales revenue
d. The margin of safety at the forecast level of output expressed both in units and as a percentage of sales
e. The number of units required to generate a profit £100,000
f. Calculate the profit expected at the forecast level of output and at the maximum level of output

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johnny wrote: »
Riley Ltd has made the following estimates for the next month:

Selling Price £25 per unit
Variable Cost £10 per unit
Fixed Costs £300,000
Forecast Output 30,000 units
Maximum Output 40,000 units

Calculate:

a. The profit volume ratio
b. The break even point in units
c. The break even point in sales revenue
d. The margin of safety at the forecast level of output expressed both in units and as a percentage of sales
e. The number of units required to generate a profit £100,000
f. Calculate the profit expected at the forecast level of output and at the maximum level of output

These will do most of that I think or give you the figures to do so

Chloe -Contribution = Selling Price per Unit-Variable Costs per Unit
Buys - Breakeven in Units = Fixed Costs/Contribution
Pink - PV Ratio = Contribution/Sales Price
Biscuits-Breakeven In Revenue = Fixed Costs/PV Ratio
Mummy-Margin of Safety In Units = Forecast - Breakeven
Makes -Margin of Safety % = Margin of Safety in Units/Forecast x 100
Them-Target Profit = Fixed Costs + Target Profit/Contribution
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Wow, someones using my Chloe acronym to actually remember the formulas!! Just shown this to my daughter - Chloe who thinks she's famous as her name is "published"!!! Lol

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A 06
B 20,000 BEP
C £500,000 breakeven in revue
D 10,000 unit
E 26666 units need for £100,000 proft

F unknown how to work it out

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In A) I assume you meant Profit volume Ratio = 0.6

In D) the margin of safety of 10,000 units is 33.3 % as a percentage of sales

For E) I would have said 26,667 units as 26,666 comes in slightly under the target profit but I expect you would get the mark.

In F) I make the expected profits

i) £15 contribution x 30,000 units - £300,000 fixed O/H = £150,000
ii) £15 x 40,000 - £300,000 = £300,000

Hope this helps! :001_smile:
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where do i and ii from?

how will i know that the quesiton will be asking for CS ratio? can you gve me the example that will appear in the question so i know that i need to use this method
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any2002uk wrote: »
where do i and ii from?

how will i know that the question will be asking for CS ratio? can you give me the example that will appear in the question so i know that i need to use this method

Re: i & ii - Well, its just the way I thought about it. You would get the same result by subtracting the total costs from the total sales revenue if you prefer that method.

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Please can someone help me on this question, I'd be most great full!
I've been given the information as per below:

Broadsworth has now incurred a fixed cost of £20000
Other than the change in fixed costs you can assume that the sales demand, selling price and all costs remain as budgeted.
Number of units to revise fixed costs £3200
Revised margin of safety % 36
Revised margin of safety in sales revenue 70200

I have to now work out:
The total cost of one unit =
The full absorption cost of one unit =
The marginal cost of one unit =
The full absorption cost of a batch =
The marginal cost of a batch =
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Breakeven is 2400 units and budgeted fix overhead is £60000
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I have just read this question

Have a look at this thread, I think it might help
http://forums.aat.org.uk/discussion/37677/margin-of-safety#latest

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