Question

Financial Information: TV tables dining Tables Chairs Selling Price per unit SAR 1,000 SAR 5,000 SAR 700 Direct Materials cost per 1 Kg of wood timber SAR 50 SAR 50 SAR 50 Kg of wood timber required per unit 10 35 5 Direct Labour hour cost SAR 30 SAR 30 SAR 30 Sales commission per item sold SAR 10 SAR 15 SAR 5 Variable manufacturing overhead per unit SAR 20 SAR 24 SAR 18 Number of labour hours per unit 3 4 2 Budgeted sales in units 300 200 450 Additional Information: Other costs: Production manager annual salary SAR 60,000 Annual marketing costs SAR 10,000- related to TV tables General Expenses SAR 5,000 Annual Fixed manufacturing overhead (excluding depreciation) SAR10,000 (20% relates to TV tables) Annual equipment depreciation SAR 10,000 The company had 8 TV tables and 100 kg of wood timber in stock at the end of September. Company policy is to maintain 20% of the following months sales level as closing inventory for finished goods. Company policy to maintain 25% of next months’ production needs as closing inventory for direct materials. Budgeted sales of TV tables for the next six months are as follows: October November December January February 40 35 20 20 20 Cash collections on sales are as follows: 30% in the month of sale 70% in the month following sale Receivables at the end of September were SAR 22,000 Cash payments on purchases are as follows: 60% in the month of purchase 40% in the following month Payables at the end of September were SAR 6,000 The closing cash balance in September 2018 was SAR 40,000 and it is company policy to maintain cash at this level at the end of each month. The company have access to a 4% bank loan of SAR 70,000 The company paid a dividend of SAR 40,000 in November Cash of SAR 50,000 was invested in the company by a private investor in December.

Using the information above, calculate the following:

Calculate the overall break-even point in sales value for the company

Answer 1

Break evenpoint sales value=

Fixed cost/contribution Margin Ratio
95,000/55.32%=1,71,728

Fixed cost=

production manager salary 60,000

Annual marketing cost 10,000

Genarel expenses 5,000

Annual fixed MOH 10,000

Depreciation 10,000

Total Fixed cost 95,000

b)contribution margin ratio=55.32%
contribution/sales*100
8,93,350/16,15,000*100

Working note:
Total sales value=300*1,000+200*5,000+450*700
3,00,000+10,00,000+3,15,000

=16,15,000SAR

contribution=sales-veriable cost

so veriable cost=

Direct material cost per unit=kg of wood*cost per kg

500:1750:250

Direct labour cost per unit=number hours per unit*raate per hour

90:120:60

sales commission per unit=10:35:5

veriable MOH =20:24:18

Total veriable cost per unit=
620:1929:333

contribution per unit=selling price per unit-veriable cost perr unit

1000-620:5000-1929:700-333

380:3071:367

Total contribution value=units*contribution per unit

300*380+200*3071+450*367=8,93,350SAR