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Question
A company manufactures and sells a single product which has the following cost and selling price structure.
£/Unit £/Unit
Selling price 120
Direct material 22
Direct labour 36
Variable overhead 14
Fixed overhead 12 84
Profit per unit 36
The fixed overhead absorption rate is based on the normal capacity of 2,000 units per month. Assume that the same amount is spent each month on fixed overheads. Budgeted sales for next month are 2,200 units.
You are required to calculate;
(i) The break-even point in sales units per month.
(ii) The margin of safety for next month
(iii)The budgeted profit for next month
(iv)The sales required to achieve a profit of £ 96,000 in a month.
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