Question

BUS 2083 Introduction to Managerial Accounting Learning Activity 2 Due Date: January 20, 2020 Time: 2:09 Problem 1: Insight Inc, deals in four different products with different manufacturing process, and specifications You, as the production head, has been asked to prepare a cost sheet specifying the minimum number of units that the company must produce and sell in the upcoming year to ensure that the company does not run into losses. You asked the production manager of each product to provide you with relevant information regarding there respective products, and they came up with the following dala Budgeted production in units) Total fixed cost of the company $950.000 Also, compule the margin of safety sales if the actual sales of the company came out to be 55000.00

Answer 1

To calculate the minimum number of units to be sold so that no loss is incurred,
we will calculate the Breah-even quantity for each product.
Break-even quantity = Total fixed costs/Contribution per unit
To derive the the break-even quantity for each product we will allocate the total fixed
cost to each product.We will use the budgeted production of each product to allocate
the fixed costs
Allocation of fixed costs
Product	Fixed Costs	Budgeted Production	Allocated Fixed Costs
	950,000
W		7,600	244,745
X		6,800	218,983
Y		9,300	299,492
Z		5,800	186,780
Total	950,000	29,500	950,000
Computation of Break-even sales quantity
Product	Allocated Fixed Costs	Contribution per unit	Break-even sales quantity
W	244,745	21	11,655
X	218,983	24	9,124
Y	299,492	23	13,021
Z	186,780	16	11,674
Total	950,000		45,474
Minimum number of units required to be sold for each product so that no loss is incurred
are as under
Product	Minimum Sales Quantity
W	11,655
X	9,124
Y	13,021
Z	11,674
Total	45,474
Computation of Margin of Safety
Margin of safety = Actual sales - Break-even sales
Actual sales = $ 5,000,000
Break-even sales = Sales price * Break-even quantity
Product	Break-even sales quantity	Sales price	Break-even sales value
W	11,655	80	932,400
X	9,124	60	547,440
Y	13,021	95	1,236,995
Z	11,674	103	1,202,422
Total	45,474		3,919,257
Margin of safety = $ 5,000,000 - $ 3,919,257
Margin of safety = $ 1,080,743
Working Notes
Contribution per unit = Sales price per unit - Variable cost per unit
Product	Sales price per unit	Variable costs per unot	Contribution per unit
W	80	59	21
X	60	36	24
Y	95	72	23
Z	103	87	16