The safety margin, Financial Management

Assignment Help:

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:
                                                                              £
Direct material                                                       200
Direct labor (20 minutes per unit)                          90/hour
Variable manufacturing overhead                              30
Variable selling expenses                                        50
Variable administrative expenses                             10

Fixed costs for the year ended 31 December 2010 were:
                                                                          £000
Fixed manufacturing                                              1,500
Fixed selling and distribution                                 1,700
Fixed administrative                                               800

The company produced and sold 275,000 units at £400 per unit.

In 2011, management has decided to enhance the selling price by 15% and to maintain the similar contribution margin ratio as last year. This increase in price is to meet an increase of £2,440,000 in fixed costs in 2011. The company has produced and sold the similar quantity in 2011 as last year.

1)    Calculate the break-even point in units for the two years 2010 and 2011 and comment on the re sults (10%)

2)    Calculate the safety margin for both years and comment on the results (5%)

3)    In the light of your answer to the previous two points, evaluate the company's policy in increasing the price by 15% in 2011 (5%).


Related Discussions:- The safety margin

Explain speculator - market participants, Explain Speculator - Market Parti...

Explain Speculator - Market Participants A speculator attempts to profit from a modification in the futures price. For doing this, the speculator will take a long or short posi

Capital asset pricing model - working with beta, Your research assistant we...

Your research assistant went home early (rock concert related illness) and left you with the following table listing the expected returns, standard deviation, correlation with the

What is debentures, Q. What is Debentures? Debentures a debenture is an...

Q. What is Debentures? Debentures a debenture is an instrument issued by the company acknowledge its debts to its holders . it is also an important method of raising long terms

Economics, a) Define monetary policy, and discuss the operation of monetary...

a) Define monetary policy, and discuss the operation of monetary policy in the United States post-GFC.

Advantages of private mutual funds, Advantages of Private Mutual Funds ...

Advantages of Private Mutual Funds It is felt that the entry of private Mutual Funds would encourage competitiveness in the financial sector and promote the existing investment

Compute the expected return and standard deviation, Question: Consider ...

Question: Consider the following information:   Stock A Stock B Beta 0.8 1.4 Share price, $

Show the current liabilities method, Q. Show the Current Liabilities Method...

Q. Show the Current Liabilities Method? Forecasting of Current Assets as well as Current Liabilities Method: - As-per to this method an estimate is made of forthcoming period's

Rationale for corporate governance, Rationale for corporate governance ...

Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti

Financial management assignment, You have just had your 30 th birthday. Yo...

You have just had your 30 th birthday. You have two children. One will go to college 12 years from now and require four yearly payments for college expenses of RM11,000, RM12,000

FINANCIAL MANAGEMENT IS INTERDISCIPLINARY, RELATIONSHIP OF FINANCIAL MANAGE...

RELATIONSHIP OF FINANCIAL MANAGEMENT WITH OTHER BUSINESS FUNCTIONS

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd