Question

Question 3 Kie Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year are as follows: T C R Selling price NS1,600 NS1,800 NS$1,400 Units 420 400 380 The standard cost card for each product is shown below. T C R NS NS NS Material 430 500 360 Labour 220 240 190 Variable overheads 110 120 95 Labour costs are 60% fixed and 40% variable. General fixed overheads excluding any fixed labour costs are expected to be N$55,000 for the next year. Required: 3.1 Calculate the weighted average contribution to sales ratio for Kie Co. (4) 3.2 Calculate the total fixed cost, the breakeven point in sales revenue and the margin of safety in terms of revenue (NS) for Kie Co. (5) 3.3 Using the graph paper provided and assuming that the products are sold in a CONSTANT MIX, draw a multiproduct breakeven chart for Kie Co. Label fully both axes, any lines drawn on the graph and the breakeven point. (6) 3.4 Rank the three products in the order of the most profitable product first and Explain what would happen to the breakeven point if the products were sold in order of the most profitable products first. (5) 3.4 Discuss five assumptions or limitations of Cost-Volume-Profit analysis.

Answer 1