Question

ZACK Sdn Bhd manufactures one standard product, which sells at RM10.00. You are required to:
(a)	prepare from the data below, a break even and profit volume graph showing the results for the six months ending 30 April 2019 and to determine:
	(i)	the fixed cost;
	(ii)	the variable cost per unit;
	(iii)	the profit-volume ratio;
	(iv)	the break-even point;
	(v)	the margin of safety;

QUESTION 1

Month		Sales (units)	Profit/(Loss) (RM)
November		30,000	40,000
December		35,000	60,000
January		15,000	(20,000)
February		24,000	16,000
March		26,000	24,000
April		18,000	(8,000)
(b)	discuss the limitations of such a graph;
(d)	explain the use of relevant range in such a graph;

Answer 1

ANSWER

		A	B=A*10	C	D=B-C
	Month	Sales in units	Sales Revenue	Profit/(Loss)	Cost
	November	30000	£ 300,000	£40,000	£ 260,000
	December	35000	£350,000	£60,000	£ 290,000
	January	15000	£150,000	-£20,000	£ 170,000
	February	24000	£240,000	£16,000	£ 224,000
	March	26000	£260,000	£24,000	£ 236,000
	April	18000	£180,000	-£8,000	£ 188,000
	Total	148000
	average monthly sales=148000/6=	24667
	Break Even point =Sales where profit=0
	From the graph ,
	Break Even point	20000	units
	Break-even Sales	£200,000	(20000*10)
	Break-even point =Fixed cost/Unit Contribution
	Variable Cost per unit =(290000-260000)/(35000-30000)=	£ 6.00
	Contribution per unit	£ 4.00	(10-6)
	Break-even point =Fixed cost/Unit Contribution
	Fixed Cost
	20000=Fixed cost/4
	Fixed cost =20000*4=	£ 80,000
	P/V Ratio =(Contribution/sales)*100%=(4/10)*100=	40%
	Margin of safety =projected sales-Break-even point
	Margin of safety =24667-20000	4667
	Margin of safety %=4667/20000=	23%

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