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Calculate the contribution margin per unit

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Reference no: EM132942987

Question - Background and Content: Brisbane Storage Locker Market Report is exclusive and talks in detail about the current market situations. Furthermore, about the overall market journey in the previous five years along with the prophecy made by the experts in the industry. However, the report also provides the necessary SWOT analysis as it's one of the main elements. In revenue terms, in the worldwide market, Brisbane Storage Locker Market is forecasted to generate a great market share.

Your client, Lock Swift Pty Ltd is worrying about their locker business in the future and asking you to help them analyse the situation. Lock Swift Pty Ltd operates a single-product entity. Data relating to the product for 2020 were as follows:

Volume sold 20,000

Selling price $13.75

Variable costs:

Variable Direct materials $1.85

Variable Direct labour $3.15

Variable factory overhead $2.65

Variable marketing expense $0.60

Fixed costs

Fixed manufacturing cost $55,713

Administrative cost (all fixed) $24,175

Required - Answer all six questions below.

1. Calculate the contribution margin per unit and calculate the break-even in both dollars and units for 2020.

2. Calculate the margin of safety in both units and sales dollars.

3. Calculate the profit achieved in 2020 given the annual volume of 20 000 units.

4. How many units must be sold for Lock Swift Pty Ltd to earn operating Income of $40,590?

5. How will you explain the limitations of the CVP? Despite having many limitations, why accountants use CVP analysis?

Reference no: EM132942987

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