Reference no: EM132604443

Arimo Electronics Ltd. (MEL) produces two types of television sets: Regular (40 Inch HD LED TV) and Smart (65 Inch HD LED TV) for sale in the Australian retail market. The market is highly competitive and the company is keen to maximize its profitability by using management accounting techniques like cost-volume-profit (CVP) analysis. As an employee of Do-Well Consulting Firm, you got the opportunity to assist MLE and answer their enquiry as a management accountant. The junior accountant of the company has complied relevant data from the annual budget for the year ended 31 December 2020 to assist you complete task.

                                                               Regular                             Smart

Budgeted annual sales units                            2,000                          6,000

Budgeted sales price per unit                           $450                           $720

Budgeted variable manufacturing cost per unit         $300                      $460

Budgeted variable Selling & Admin. Cost per unit        $70                    $160

Annual Fixed Costs:

Fixed Manufacturing cost                      $204,500

Fixed Selling & Admin cost                     $ 90,000

Required:

Question 1. Calculate the number of Regular and Smart TV's that the company should sell in order to break-even in the year 2020. (Ignore income taxes.)

Question 2. Compute the safety margin in units for the year 2020. Explain the importance of knowing or calculating safety margin.

Question 3. How many units of Regular and Smart TV's should the company sell in order to earn before tax profit of $79,800 in 2020?

Question 4. Explain factors that affect the design of appropriate organizational structure.