Profitability Analysis, Flexible Budget and Marginal Costing 2. A budgeted profit statement of a company working at 75% capacity is provided to you
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below, Sales Less: 9,000 units at Rs. 32 Direct materials Direct wages Production overhead: fixed variable Gross profit Less: Administration, selling and distribution costs: fixed varying with sales volume Net profit You are required to: (a) Calculate the breakeven point in units and in value. (b) It has been estimated that: (i) if the selling price per unit were reduced to Rs. 28, the increased demand would utilise 90% of the company's capacity without any additional advertising expenditure, and 36,000 27,000 63,000 39,000 42,000 18,000 1,86,000 1,02,000 Rs. 54,000 72,000 Rs. 2,88,000
(ii) to attract sufficient demand to utilise full capacity would require a