Question

        

Kayla came to you for financial advice. He is about to set up a business manufacturing and selling slippers for children. He provides you with the following budgeted information concerning his total costs.

Material Cost	560,000
Labour Cost	600,000
Production Overhead	300,000
Selling & Distribution Overhead	280,000
Administrative Overhead	120,000

The above figures are based on budgeted production of 3,500 handbags. The budgeted price per bag is $600

You ascertain that $250,000 of labour costs, 100% of administrative overheads, 30% of production overheads and 50% of selling & distribution overheads are fixed in nature. All other costs are variable with the level of production.

A.Prepare a cost statement showing contribution and profit for the budgeted level of production.

B.What is the contribution per slippers? And what is the contribution to sales ratio?

C.Calculate the break- even point in units & in sales dollars using the equation and the contribution margin technique.

N.BPlease take in consideration the technique mention above

   

  

Answer 1