Accounting for Business and Managers
Introduction
Business Solution Services
Units
Units
4,500
Sales
1,890,000
6,500
Sales
2,535,000
Opening Stock
opening Stock
Production
1,080,000
Production
1,612,000
1,080,000
1,612,000
Contribution
810,000
Contribution
923,000
Fixed Overheads
-360,000
Fixed Overheads
-400,000
Net Profit
450,000
Net Profit
523,000
Management accounting is defined as ‘the provision of information to people within an organisation to help them make better decisions and improve the efficiency and effectiveness s of existing operations.
Task 1 (a)
(b) Break Even analysis
C/S = Total Contribution/Total Sales
1,890,000/810,000= 2.3
Break even = fixed cost/contribution to sales
360,000/2.3 = 156,521
So to break even the company will need to sell 156,521
2,535,000/923,000 = 2.7
Break even = fixed cost/contribution to sales
400,000/2.7 = 148,148
So to break even the company will need to sell 148, 148
The sales levels that would have to be attained in 2009 in order to generate a profit equal to what was earned in 2008, the business will have to sell 4,846 units.
Fixed overhead + desired profit
Contribution per unit
=360,000 + 950,000/180 = 7, 277
Task 2 (1a) Absorption Costing
March
April
Sales
61,250
98,000
Opening Stock
11,250