When Using the Highminuslow ​method, the Variable Cost Per Unit Can Be Found as

Contents

1. Summaries of key concepts
2. Multiple Choice Questions
   1. Multiple Option Questions 9.one
   2. Multiple Choice Questions 9.2
   3. Multiple Choice Questions nine.3
   4. Multiple Choice Questions 9.4
3. Numerical exercises
   1. Numerical do 9.1 - Contribution analysis
   2. Numerical do 9.2 - Making outsourcing decisions
   3. Numerical exercise 9.3 - Limiting factor analysis
4. Go back over this again
   1. Exercise ix.i - Fixed and variable costs
   2. Do 9.2 - Relevant costs and sunk costs
   3. Do 9.three - Opportunity cost
   4. Exercise 9.4 - Contribution analysis
5. Show me how to exercise it
   1. Video 9.ane - Limiting cistron analysis
6. Web links and farther reading

Multiple Choice Questions nine.4

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Question 1: Using break-even analysis to decide a target profit. Lamp Lighting produces lamps from bought in parts. The variable cost of each lamp comprises of directly materials of £six.00, labour costs of £ten.00 and variable overheads of £2.00. Lamp Lighting has fixed overheads of £180,000 and sells its lamps for £30 each. Current sales are 20,000 lamps per annum and the break-fifty-fifty bespeak is 15,000 lamps. How many lamps would Lamp Lighting have to sell to make a target profit of £135,000? a) 4,500 b) 11,250 c) 20,000 d) 26,250 You accept correctly remembered how to calculate the number of units of sales to reach a target profit. The number of units of sales is given by the calculation (target profit ÷ contribution per unit of sales) + interruption-even sales in units. In this instance, contribution per unit of measurement is £30 selling price - £six direct materials - £10 labour costs - £2 variable overheads = £12. Dividing the target turn a profit of £135,000 past £12 contribution per sale gives a sales level of eleven,250 lamps. Adding this sales level to the break-even level of sales, the sales in units required to cover the fixed costs of the organization, gives full sales of lamps of eleven,250 + 15,000 break-even sales in units = 26,250. Proof: Sales of 26,250 lamps volition generate total contribution of 26,250 x £12 = £315,000. Deducting fixed costs of £180,000 from this contribution gives the target profit of £135,000. Page reference: 306-307 Cheque your calculations again. Remember that the number of units of sales to accomplish a target profit is given by the calculation (target profit ÷ contribution per unit of measurement of sales) + break-even sales in units. In this example, contribution per unit is £30 selling price - £6 directly materials - £10 labour costs - £2 variable overheads = £12. Dividing the target profit of £135,000 by £12 contribution per sale gives a sales level of 11,250 lamps. Calculation this sales level to the break-even level of sales, the sales in units required to embrace the fixed costs of the organisation, gives full sales of lamps of 11,250 + 15,000 break-fifty-fifty sales in units = 26,250. Proof: Sales of 26,250 lamps will generate full contribution of 26,250 10 £12 = £315,000. Deducting fixed costs of £180,000 from this contribution gives the target profit of £135,000. Page reference: 306-307 Your respond has been saved.

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Question ii: Using pause-even analysis to make up one's mind a target profit. Pileitup produces shelving units. The variable cost of each shelving unit of measurement comprises of straight materials of £30.00, directly labour of £10.00, packaging costs of £7.00 and variable overheads of £3.00. Pileitup has fixed overheads of £300,000 and sells its shelving units for £75 each. Current sales are 25,000 shelving units per annum and the suspension-even bespeak is 12,000 shelving units. How many shelving units would Pileitup have to sell to brand a target turn a profit of £270,000? a) 9,000 b) ten,800 c) 22,800 d) 25,000 Yous accept correctly remembered how to summate the number of units of sales to reach a target profit. The number of units of sales is given by the calculation (target turn a profit ÷ contribution per unit of sales) + break-fifty-fifty sales in units. In this instance, contribution per shelving unit is £25 (£75 selling price - £30 direct materials - £10 direct labour costs - £7 packaging costs - £three variable overheads). Dividing the target profit of £270,000 by £25 contribution per auction gives a sales level of 10,800 shelving units. Adding this sales level to the pause-even level of sales, the sales in units required to cover the fixed costs of the organization, gives total sales of shelving units of 10,800 + 12,000 interruption-even sales in units = 22,800. Proof: Sales of 22,800 shelving units will generate full contribution of 22,800 10 £25 = £570,000. Deducting fixed costs of £300,000 from this contribution gives the target profit of £270,000. Page reference: 306-307 Check your calculations once again. Remember that the number of units of sales to accomplish a target turn a profit is given by the calculation (target turn a profit ÷ contribution per unit of sales) + break-even sales in units. In this case, contribution per shelving unit is £25 (£75 selling price - £xxx direct materials - £10 straight labour costs - £vii packaging costs - £3 variable overheads). Dividing the target profit of £270,000 past £25 contribution per sale gives a sales level of 10,800 shelving units. Adding this sales level to the pause-even level of sales, the sales in units required to embrace the stock-still costs of the organization, gives total sales of shelving units of ten,800 + 12,000 intermission-even sales in units = 22,800. Proof: Sales of 22,800 shelving units volition generate total contribution of 22,800 x £25 = £570,000. Deducting stock-still costs of £300,000 from this contribution gives the target turn a profit of £270,000. Folio reference: 306-307 Your answer has been saved.

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Question 3: Using break-fifty-fifty analysis to determine a target turn a profit. Flycostcapped operates aircraft from diverse airports in the UK to various destinations in Europe. The company wishes to introduce contribution and intermission-even assay to the accounting function to determine the profitability of each flight and has asked for your aid. The company has chosen the flight from Birmingham to Barcelona for you lot to demonstrate how break-even assay works. Flycostcapped offers 1 style flights to Barcelona for £50 and the directors expect average additional revenue from each passenger to be £55 from luggage charges, refreshments and credit carte charges. The fixed cost of each flying from Birmingham to Barcelona is £7,500 and the variable cost per passenger is £5 per flight. The shipping used on the Birmingham - Barcelona road has a capacity of 150 seats and the boilerplate number of passengers on each Birmingham - Barcelona flight is 100. The intermission-fifty-fifty point in number of passengers on Birmingham - Barcelona flights is 75. How many seats would Flycostcapped take to sell to make a profit per Birmingham - Barcelona flight of £iv,500? a) 150 b) 120 c) 100 d) 75 You take correctly remembered how to calculate the number of units of sales to achieve a target profit. The number of units of sales is given by the adding (target profit ÷ contribution per unit of sales) + intermission-even sales in units. In this case, contribution per passenger is £100 (£105 (£50 fare + £55 additional revenue per passenger) selling cost - £5 variable costs per passenger = £100). Dividing the target profit of £iv,500 past £100 contribution per seat sold gives a sales level of 45 passengers. Adding this sales level to the intermission-even level of passengers, the passengers required to cover the stock-still costs of the organization, gives total passengers of 45 + 75 break-even passengers = 120. Proof: 120 passengers will generate total contribution of 120 ten £100 = £12,000. Deducting fixed costs of £7,500 from this contribution gives the target profit of £4,500. Page reference: 306-307 Bank check your calculations again. Remember that the number of units of sales to achieve a target profit is given by the adding (target profit ÷ contribution per unit of sales) + break-even sales in units. In this case, contribution per passenger is £100 (£105 (£fifty fare + £55 additional revenue per passenger) selling cost - £5 variable costs per passenger = £100). Dividing the target profit of £4,500 by £100 contribution per seat sold gives a sales level of 45 passengers. Adding this sales level to the break-fifty-fifty level of passengers, the passengers required to cover the fixed costs of the organization, gives full passengers of 45 + 75 interruption-fifty-fifty passengers = 120. Proof: 120 passengers will generate full contribution of 120 x £100 = £12,000. Deducting stock-still costs of £vii,500 from this contribution gives the target profit of £4,500. Page reference: 306-307 Your answer has been saved.

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