Question

Edinburg Company Accounting information for planning and decision-making The Directors of Edinburg Company are planning for the next year (2020). They want to develop a strategic plan based on the capacity and opportunities of their business. The accountant provided the following forecast for 2020: Budgeted operating activities Sales - $ 800,000 Cost of sales (manufacturing costs) Materials 300,000 Labour 110,000 Variable overheads 50,000 Fixed overheads 60,000 $ 520,000 Selling LLL L Commission* 80,000 Variable expenses 60,000 Fixed expenses 20,000 $ 160,000 Administrative Variable expenses 30,000 Fixed expenses 30,000 $ 60,000 $ 740,000 Budgeted profit $ 60,000 Budgeted production Capacity 400,000 units 600,000 units Sales commission is equal to 10% of sales $

Answer 1

Budgeted Operating Activities
				Amount	Units	Rate per unit
Sales				800000	400000	2
Cost of sales(manufcturing costs)
Materials		300000			400000	0.750
Labour		110000			400000	0.275
Variable Overhead		50000			400000	0.125
Fixed overhead		60000			600000
			520000
Selling
Commission*		80000			400000	0.200
Varaible expenses		60000			400000	0.150
Fixed expense		20000			600000
Advertising expense
			160000
Administrative
Variable expense		30000			400000	0.075
Fixed expenses		30000			600000
			60000
				740000
Budegeted Profit				60000
Budegeted Production			400000 units
Capacity			600000 units
Sales commission is equal to 10% of sales $.
Sales Price						2
Variable cost per unit						1.575
Contirbution						0.425
Fixed cost						110000

All in $ Rest costs are same as units are same Option 1 Amount Units Rate (400000*2.2) 880000 600000 Amount Option 2 Amount Amount 1080000 Units Rate 5000002 Amount Option 3 Amount Amount 1000000 Cost associated with European order Variable cost Increase in mfg costs Addtn shipment costs(Fixed costs) 1.8 1.375 0.15 20000 1.525 300000 110000 50000 60000 600000 600000 600000 0.750 0.275 0.125 450000 165000 75000 60000 500000 500000 500000 0.750 0.275 0.125 375000 137500 62500 60000 BEQ Fixed costs/Sale price-Variable cost 100000 20000/x-1.525 152500 100000x-(100000*1.525) 20000 100000x 172500 1.725 520000 750000 635000 108000 Selling price should be 1.725 88000 60000 20000 600000 600000 0.18 0.150 500000 500000 0.2 0.150 100000 75000 20000 40000 20000 0 70000 Relevant cost in relation to European offer Increase in mfg costs 0.15 Addtn shipment costs 20000 238000 218000 235000 600000 0.075 500000 0.075 30000 30000 45000 30000 37500 30000 60000 75000 67500 818000 1043000 937500 62000 37000 62500 BEO = Fixed costs Price per unit - Variable costs per unit

Sales Price						2							1.8						2
Variable cost per unit						1.575							1.555						1.575
Contirbution						0.425							0.245						0.425
Fixed cost						110000							110000						110000
												Break even quantity		448,979.59				Break even quantity		258,824