Question 6
ICAN
•
2026
•
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 N’000 N’000 N’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 cost (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.
Requirements
(
a
)
Determine the breakeven sales in units for the company, using the budgeted data.
(
b
)
Now assume that the following changes are made to the budget: (i) Unit selling price of product B is reduced to ₦160. (ii) Direct material cost is expected to drop by 10% for product A and 20% product B. (iii) Direct labour costs for each product will increase by 10%. (iv) Additional ₦456,000 will be spent on advertising. (v) 80% of total revenue will be derived from product B. Determine the break even sales in units and values for the company.
(
c
)
Assuming all the facts in (b) (i) – (v) above are applicable, calculate how much sales revenue must be made by the company to earn an after tax rate of return of 12% of the revenue? Assume tax rate of 40%.
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About This Question
This is
Ican
2026
Performance Management
Question 6.
It is one of the
mixed
questions from the
2026
Ican
Performance Management
examination.