Reference no: EM132811058

Buco Limited has provided the following cost data for last year when 100 000 units (normal production) were produced and sold (selling for R10 per unit):

Raw material                                R250 000
Direct labour                                R110 000
Manufacturing overhead                     R370 000
Selling and administrative expense        R120 000

All costs are variable except for R100 000 of manufacturing overhead and R100 000 of selling and administrative expense. There is no opening or closing inventory.

Problem 1: The break-even in units for Buco Limited is:

a. 57 143 units
b. 47 669 units
c. 83 420 units
d. 54 054 units

Problem 2: The contribution ratio of a company is 75%. The contribution is R900 000.

Total fixed cost is double the total variable cost at the particular activity level.

The degree of operating leverage is:

a. Not enough information is provided to calculate the degree of operating leverage

b. 1.2

c. 3.0

d. The company is making a loss at this particular activity level.