MANAGEMENT ACCOUNTING
Topic: Break
– Even – Analysis
For:
Questions and answers, email: theotherwomaninmarriage@gmail.com
This is the D and E part solution of the BEA question.
Now, answer
to D:
a.
Computation of Margin of Safety (MOS)
Actual Sales
– Sales at Break Even
MOS= 145,500 – 88,525 = 56,975.
b.
Calculation of Break Even Point in value assuming
sales increase by 40%
Initial
sales was N145,500
We have
increase of 40% which is 0.45 x 145,500 = 58,000. Add this 58,000 to 145,500
you will get 203,500. This 203,500 is our new sales with the increase of that
40%.
So, we have
to calculate for a new CMR and then calculate for the new B.E.P.
CMR = 147,200
203,500
= 0.72
We got 147,
200 as a new contribution. When you
minus 56,300 which is our variable cost from new sales of 203,500 then you have
a new contribution of 147,200.
Then finally, our new B.E. Point in
value when sales increase by 40% is thus:
B.E.P in value = 54,000
0.72
B.E.P = N75,000
Note: We had argument on this last answer that the variable cost also
should be increased by 40%. And we will
get back to you if this part needs that 40% increase, then we will do a new
computation on this part e. But, from a to d is ok.
Warmest regards to you all.
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