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2.Required sales, in units and in dollars, to achieve pre-tax profit goal of $30,000:
units = (F + B) cm per unit = ($324,000 + $30,000) $27/unit
= $354,000 $27/unit = 13,111.11 units
6 / 3 = 2 marks
3. Contribution income statement:
4. Cost structure refers to the relative proportion of fixed and variable costs in an
organization. For this company the cost structure is 72% variable and 28% fixed. This
company is low in fixed cost component. This company with low fixed cost structures
enjoy greater stability in income across good and bad years.
5. In my opinion the manager is wrong because the Loss will increase by $19,500, from -
$27,000 to - $46,500
8/2 = 4 marks
Or,
= Increase in CM Increase in Fixed Costs
6. The company should not proceed because Profit will decrease $109,400, from a loss of
$27,000 to a loss of $136,400
8/2 = 4 marks
7. It was a wise change. The total reduction in variable cost is $5 11,000 = $55,000,
while the increase in fixed costs is $30,000, resulting in a net savings of $25,000.
15 ticks/3 = 5 marks
1) Construct the direct labor budget for the next two months.
July August