Reference no: EM13340513

Using Profit and Loss Statement information to perform CVP analysis

Last year's profit and loss statement for ABC Ltd was presented as follows:

 

Sales (20 000 @ $20)                $400 000

Cost of Sales:
Direct Materials   $120 000
Direct Labour       80 000            200 000
                                              200 000

Other Expenses:

Fixed	40 000
Variable	100 000	140 000
Net Profit		$60 000

This year sales volume is expected to decrease by 5%, and total material and labour costs are expected to increase by 10%. Other variable expenses fluctuate directly with dollar sales. Fixed expenses are expected to drop by $3500.

Required:

(a)  Ignoring income taxes, what is this year's expected net profit?

(b)  What sales price per unit will be necessary this year if management wishes to maintain the same profit to sales ratio as last year?