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The budgeted profit statement for a manufacturing company's next financial year projects sales of 9,000 units at LKR 32 each, with direct materials costing LKR 288,000, direct wages costing LKR 54,000 and production overhead costing LKR 72,000, resulting in a gross profit of LKR 42,000. After deducting fixed administration, selling and distribution costs of LKR 28,000, the projected net profit is LKR 14,000. Two alternatives are estimated: reducing the price to LKR 28 could utilize 90% capacity without extra advertising, while fully utilizing capacity would require a 25% price reduction and a LKR 5,000 advertising campaign.

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18 views2 pages

LKR LKR

The budgeted profit statement for a manufacturing company's next financial year projects sales of 9,000 units at LKR 32 each, with direct materials costing LKR 288,000, direct wages costing LKR 54,000 and production overhead costing LKR 72,000, resulting in a gross profit of LKR 42,000. After deducting fixed administration, selling and distribution costs of LKR 28,000, the projected net profit is LKR 14,000. Two alternatives are estimated: reducing the price to LKR 28 could utilize 90% capacity without extra advertising, while fully utilizing capacity would require a 25% price reduction and a LKR 5,000 advertising campaign.

Uploaded by

aloy1574167
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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A summary of a manufacturing companys budgeted profit statement for its next financial year, when it expects to be operating at 75 percent

of capacity, is given below. LKR Sales 9,000 units at LK 32 Less: direct materials direct wages production overhead !i"ed varia#le &ross pro!it Less: administration, selling and distri#ution costs: !i"ed var'ing with sales volume (et pro!it )t has #een estimated that: !i" i! the selling price per unit were reduced to LK 28, the increased demand would utilise 90 per cent o! the compan'*s capacit' without an' additional advertising e"penditure+ !ii" to attract su!!icient demand to utilise !ull capacit' would re,uire a $5 percent reduction in the current selling price and a LK 5,000 special advertising campaign.ou are re,uired to: /a0 calculate the #rea1even point in units, #ased on the original #udget+ /#0 calculate the pro!its and #rea1even points which would result !rom each o! the two alternatives and compare them with the original #udgetLKR 288,000 54,000 72,000 42,000 $8,000 $8%,000 $02,000

3%,000 27,000 %3,000 39,000

2.3 Ltd is planning to ma1e $20,000 units per period o! a new product- 4he !ollowing standards have #een set: 5irect material A 5irect material # 5irect la#our: 6peration $ 6peration 2 6peration 3 Per unit $-2 1g at LK $$ per 1g 4-7 1g at LK % per 1g 42 minutes 37 minutes $$ minutes

7ll direct operatives are paid at the rate o! LK 8 per hour- 7ttaina#le wor1 hours are less than cloc1 hours, so the 500 direct operatives have #een #udgeted !or 400 hours each in the period7ctual results !or the period were: $roduction %irect la#our &aterial A &aterial # Requirements $0 la#our e!!icienc' variance 20 la#our rate variance 30 material price variances 40 material usage variances $2%,000 cost LK cost LK cost LK units $-7 m !or 2$5,000 cloc1 hours '-%5 m !or $50,000 1g 3-% m !or 590,000 1g

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