Question

Question 4: (10 marks) (B1, C1) Part A: (7 marks) Fatima Company plans to sell 6,000 units at $60 each in the coming year. Variable cost per unit is $12 and total fixed cost is $24,000. Instructions: 1. Calculate the contribution margin ratio? (1 mark) 2. Calculate the break-even point in units? (2marks) 3. Calculate the break-even point in sales dollars? (2 marks) 4. If Fatima Company has a target profit of $90,000, how many units will they have to sell? (2 marks) Part B: (3 marks) Job 200 consists of 300 units and has total manufacturing costs of direct materials, $4,500; direct labor, $7,500; and overhead, $3,600. Instructions: a. What is the unit product cost? (1 mark) b. What are the prime costs per unit? (2 mark) c. What are the conversion costs per unit? (2 mark)

I need only question 5

Answer 1

Answer:

Part A:

1. Contribution margin ratio=Sales-variable costs/sales*100=60-12/60*100=80%

2. Breakeven points in units=Fixed Costs/(Selling price per unit-variable cost per unit)=24000/(60-12)=500 Units

3. Breakeven in sales dollars=BEP in units*Selling price per unit=500*60=$30,000

4. For target profit of $90,000,

we know that, profit=Selling revenues-total variable cost-fixed costs

let us assume units to be x, then,

90000=60x-12x-24000

48x=66000

x=1375 units

Part B:

a. Unit product costs=(direct material+direct labour+factory overheads)/production units=4500+7500+3600/300

=$52/unit

b. Prime cost per unit=(direct material+direct labour)/production units=(4500+7500)/300

=$40/unit

c. Conversion cost per unit=(Direct Labour+factory overheads)/production units=7500+3600/300=$37/unit