Reference no: EM132633693

Norton Ltd manufactures a single product, which is sold for $150 per unit. The standard variable costs per unit of the product are: Direct material 4 kilos at $8 per kilo Direct labour 5 hours at $10 per hour Production overhead $2.5 per direct labour hour Sales overhead $5 per unit The company expects to manufacture and sell 8,000 units in total during the forthcoming year (Year 1). The fixed overhead costs for the forthcoming year are: $ Production 60,000 Administration 35,000 Sales 11,000 Required:

Question (a) Calculate profit in Total for Year1

Question (b) Calculate for the forthcoming year (Year 1):

(i) The break-even point in dollars and units (ii) The margin of safety in dollars and units (iii) The amount of sales in units that would earn the company a profit of $180,000

Question (c) The following cost increases are expected in the following year (Year 2): Variable costs: +10% Fixed Cost: +8% Required: Calculate for Year 2:

(i) The break-even point in units and dollars using the variable and fixed cost calculated in (c) above.  (ii) The amount of sales in units to earn the company a profit of $180,000 if the selling price was raised to $150.