Question 4 [24 marks] PART A Leatherex produces and sells luxury leather handcrafted wallets, for which the following da

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Question 4 24 Marks Part A Leatherex Produces And Sells Luxury Leather Handcrafted Wallets For Which The Following Da 1 (47.1 KiB) Viewed 31 times

Question 4 24 Marks Part A Leatherex Produces And Sells Luxury Leather Handcrafted Wallets For Which The Following Da 2 (47.1 KiB) Viewed 31 times

Question 4 24 Marks Part A Leatherex Produces And Sells Luxury Leather Handcrafted Wallets For Which The Following Da 3 (57.13 KiB) Viewed 31 times

Question 4 [24 marks] PART A Leatherex produces and sells luxury leather handcrafted wallets, for which the following data is available: Selling price Direct material cost Direct labour cost Variable production overhead Fixed production overhead Fixed selling and administrative Budgeted output £325 per unit £34 per unit £60 per unit £17 per unit £901,800 per year £532,000 per year 12,000 units Required: a) Calculate the contribution (margin) per unit in £. (3 marks) b) Calculate the number of wallets the business must sell to break even. (2 marks) (3 marks) c) Calculate the sales revenue that Leatherex has to generate in order to achieve a profit of £999,380. d) Calculate the margin of safety (expressed as a percentage). (2 marks) e) Indicate two (2) limitations of Break-even Analysis (2 marks)

PART B Tristar manufactures and sells vehicle tyres. The following annual cost budgets have been prepared for two levels of the factory capacity: Percentage (%) of full capacity* 40% 75% Units of Output 360,000 675,000 Costs: £ Direct Materials 8,280,000 15,525,000 Direct Wages 6,120,000 11,475,000 £ Production and Other Overheads (Semi-variable cost) 2,942,000 5,462,000 230,000 32,692,000 Advertising cost 230,000 Total costs 17,572,000 Note: "The maximum annual capacity of the factory is 900,000 units Required: a) i. From the above data calculate Direct Material cost per unit and Direct Wages per unit. (2 marks) ii. Separate the Production and Other Overheads into Fixed and Variable costs using (3 marks) the 'High-Low' method. ii. Prepare a Flexible cost budget for a 95% level of activity. (5 marks) b) Consider each of the following costs incurred by Tristar and state whether each is an example of fixed cost or variable cost: (2 marks) i. Cost of rubber for making tyres li. Straight-line depreciation on the tyre building machine Factory insurance iv. Annual salary of business manager iii.