Question 5
ICAN
•
2022
•
PERFORMANCE MANAGEMENT
•
mixed
Case Stimulus
Abayomi Plc produces and sells two major products, A and B. The budgeted income statement for the year to December 31, 2022 is given below:
Products A B Total
₦’000 ₦’000 ₦’000
Sales 8,400 25,200 33,600
Production costs:
Materials 2,240 5,040 7,280
Direct labour 1,120 3,360 4,480
Variable overheads 1,120 2,240 3,360
Fixed overheads 560 1,680 2,240
Total 5,040 12,320 17,360
Gross Profit 3,360 12,880 16,240
Fixed selling and Adm. (8,320)
Net profit before tax 7,920
The budgeted selling prices of the products are:
A ₦120
B ₦180
Additional Information
{
"label": "Supporting information 1",
"content": "| Products | A | B | Total |\n|----------|------|-------|-------|\n| | ₦'000 | ₦'000 | ₦'000 |\n| Sales | 8,400 | 25,200| 33,600|\n| Production costs: | | | |\n| Materials| 2,240 | 5,040 | 7,280 |\n| Direct labour | 1,120 | 3,360 | 4,480 |\n| Variable overheads | 1,120 | 2,240 | 3,360 |\n| Fixed overheads | 560 | 1,680 | 2,240 |\n| Total | 5,040 | 12,320| 17,360|\n| Gross Profit | 3,360 | 12,880| 16,240|\n| Fixed selling and Adm. | | | (8,320)|\n| Net profit before tax | | | 7,920 |"
}
Requirements
(
a
)
Determine the breakeven sales in units for each of the products, using the budgeted data.
(
a
)
Now assume that the following changes are made to the budget:
(
b
)
Calculate how much sales revenue must be made to earn an after tax rate of return of 12% of the revenue? Assume tax rate of 40%.
(
c
)
Assuming all the facts in (b) (i) – (v) above but with the original budgeted revenue of ₦33,600,000. Compute the revised breakeven sales in units for each of the products.
Detailed Solution & Marking Scheme
Get the step-by-step solution,
key points required by examiners
and detailed marking guidance
through the Edcrib AI Tutor.
Reveal Answer
About This Question
This is
Ican
2022
Performance Management
Question 5.
It is one of the
mixed
questions from the
2022
Ican
Performance Management
examination.