Question

Please, I need the answer and the approaches step by step( all the information about how to get the data) in an easy way for my understanding Thanks!

on 4. C ompuspeed is an agency-operation selling a computer software package for a major computer company. The budget has been prepared for the coming year as follows: Sales (5,000 units) 750,000 500,000 70,000 80.000 100.000 Variable Cost of Sales Fixed Costs: Administration Selling & Distribution Profit equire (2 marks) Calculate the C/S Ratio. (a) (8 marks) Calculate the break even point in units and value. (b) (5 marks) Calculate the margin of safety in units and value. (c) CONSIDER (d) aud (e) SEPARATELY The company would like to improve profits by 50%-how many (d) extra únits must be sold to earn the target profit if the selling price could only be increased by 5%, but the variable cost of sales increased by 10%2 . (5 marks) The marketing manager feels that employing an extra sal (e) representative at a cost of £25,000 per annum will increase sales to 6,000 in units if the sales representative was recruited units. Calculate the resulting profit and the break even (5 marks)

Answer 1

answer

a) contribution/sales ratio = 250000/750000 = 1:3

contribution = sales-variable cost

= 750000-500000 = 250000

b) break even point

• in units = fixed cost / (sales per unit- variable cost per unit)

= 150000/(150-100)

= 3000 units

fixed cost = 70000 + 80000 = 150000

sales per unit = 750000/5000 = 150

variable cost per unit = 500000/5000 = 100

• in sales = price x break even point in units

= 3000 x 150 = 450000

c) margin of safety

• in sales = actual sales - breakeven sales

= 750000 - 450000 = 300000

• in units = margin of safety in sales/price

= 300000/150 = 2000

d) new price = 150 add 5% = 157.5

new variable cost per unit = 100 add 10% = 110

new profit = 100000 add 50% = 150000

let units be x

profit = 157.5x - 110x - 150000 = 150000

x = 6316 approx

e) now units sold = 5000 + 6000 = 11000

profit = 50 x 11000 - 150000 - 25000 = 375000

break even units = fixed cost/contribution per unit

= 175000/50 = 3500 units