Question 1 A.A Ltd has fixed costs of £60,000 per annum. It manufactures a single product which it sells for £20 per un

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Question 1

A.A Ltd has fixed costs of £60,000 per annum. It manufactures a single product which it sells for £20 per unit. Its contribution to sales ratio is 40 per cent. A Ltd.’s breakeven point in units is:

a) 1,200

b) 3,000

c) 5,000

d) 7,500.

B. C Ltd manufactures a single product which it sells for £9 per unit. Fixed costs are £54,000 per month and the product has a variable cost of £6 per unit. In a period when actual sales were £180,000, B Ltd.’s margin of safety, in units, was:

a) 2,000

b) 14,000

c) 18,000

d) 20,000.

C. For the forthcoming year, E plc’s variable costs are budgeted to be 60 per cent of sales value and fixed costs are budgeted to be 10 per cent of sales value. If E plc increases its selling prices by 10 per cent, but if fixed costs, variable costs per unit and sales volume remain unchanged, the effect on E plc’s contribution would be:

a) a decrease of 2 per cent.

b) an increase of 5 per cent.

c) an increase of 10 per cent.

d) an increase of 25 per cent.