CHAPTER 15


Question 29 Doyle Ltd produces a single product. The company’s Profit and Loss Account for the year ended 31/12/2012, during which 12,000 units were produced and sold, was as follows. The company operated at 70% of capacity in 2012.


€


Sales (12,000) Materials


Direct Labour Factory Overheads Administration Expenses


100,000 50,000 80,000 80,000


€ 360,000


310,000 50,000


The materials, direct labour and 20% of factory overheads are variable costs. 60% of the administration expenses is fixed.


You are required to calculate: (a) The company’s Break Even and Margin of Safety. (b) The profit or loss the company would make in 2013 if it reduced its selling price by 20%, increased advertising by €8,000 and therefore increased sales to15,000 units with all other cost levels unchanged.


(c) The number of units that must be sold at €25 per unit to provide a profit of 20% of the sales revenue received from the same units


(d) The profit the company would make if a commission of 5% of sales is given to sales personnel and €1 extra per unit was spent on more improved packaging, thereby increasing the sales to 20,000 units at €32 per unit.


Question 30 Royle Ltd produces a single product. The company’s Profit and Loss Account for the year ended 31/12/2012, during which 30,000 units were produced and sold, was as follows. The company operated at 70% of capacity in 2012.


€


Sales (30,000) Materials


Direct Labour Factory Overheads Administration Expenses


125,000 115,000 80,000 90,000


€ 600,000


410,000 190,000


The materials, direct labour and 30% of factory overheads are variable costs. €60,000 of the administration expenses is fixed.


You are required to calculate: (a) The company’s Break Even and Margin of Safety. (b) The profit or loss the company would make in 2013 if it reduced its selling price by 20%, increased advertising by €16,000 and therefore increased sales to 32,000 units with all other cost levels unchanged.


(c) The number of units that must be sold at €15 per unit to provide a profit of 20% of the sales revenue received from the same units.


(d) The profit the company would make if a commission of 5% of sales is given to sales personnel and €2 extra per unit was spent on more improved packaging, thereby increasing the sales to 28,000 units at €25 per unit.


There is no set way to lay out a solution. Stick to the way you feel at ease with.


239


15


TIP


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