Can anyone answer this question? Please!

johnny
johnny Just JoinedRegistered Posts: 1
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

Comments

  • DaveIOW
    DaveIOW Feels At Home Registered Posts: 85
    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
  • columbia
    columbia Experienced Mentor Registered Posts: 580
    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 :)

    Sorry, had to share!
    Donna Curling
  • any2002uk
    any2002uk Feels At Home Registered Posts: 88
    please tell me if i got the right answer!

    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

    please PM me too
  • definite.studies
    definite.studies Feels At Home Registered Posts: 88
    Hi any2002uk, I mostly agree with your answers.

    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:
  • any2002uk
    any2002uk Feels At Home Registered Posts: 88
    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
  • definite.studies
    definite.studies Feels At Home Registered Posts: 88
    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.

    I'm not sure I understand your Q about CS ratio - are you asking about part d?
  • j1994
    j1994 Registered Posts: 106
    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 =
  • j1994
    j1994 Registered Posts: 106
    Breakeven is 2400 units and budgeted fix overhead is £60000
  • SandyHood
    SandyHood Font Of All Knowledge Registered, Moderator Posts: 2,034
    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

    Sandy
    [email protected]
    Sandy
    [email protected]
    www.sandyhood.com
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