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Question - Scarcity Enterprise makes three products, AL, BE and OM. The following information was provided in order to do a cost, volume, profit analysis.
AL $
BE $
OM $
Selling price
180
270
240
Less Variable Expenses:
Direct materials
24
72
32
Other variable expenses
102
90
148
Total variable expenses
126
162
Demand (units)
500
Total fixed cost
$721,500
Required -
I. Advise management on the amount of each product to manufacture to break-even. Show all workings.
II. Calculate the amount of each product to manufacture to make a profit of $111,000 before tax. Show all workings.
III. List three assumptions of CVP.
IV. Explain the term margin of safety and state three ways in which it can be expressed.
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