MAC2601
ASSIGNMENT 5 SEMESTER 2 2024
UNIQUE NO.
DUE DATE: 11 OCTOBER 2024
, MAC2601
Assignment 5 Semester 2 2024
Unique Number:
Due Date: 11 October 2024
Principles of Management Accounting
Question 1
(a) Calculate the quarterly breakeven point in units and Rand amount.
To find the breakeven point, we need to figure out how many units Body Lotions (Pty)
Ltd needs to sell in a quarter to cover all their costs, without making a loss or a profit.
The formula for breakeven in units is:
Breakeven in units=Contribution per unitFixed Costs
Here, we're not directly given the fixed costs or the contribution per unit. But we know
some things:
Total profit = R15,000
Sales = R180,000
Contribution = Sales – Variable costs (but we don't have that exact breakdown)
We do know that the profit is what’s left after the fixed costs and the contribution margin.
Since we’re looking for breakeven, profit will be zero. So, let’s first figure out the
contribution margin (which is Sales minus Variable Costs).
Breakeven in Rand is when sales exactly cover both variable and fixed costs.
(b) Determine the contribution margin at the breakeven point.
, Contribution margin is simply the difference between sales and variable costs. It shows
us how much money from sales is left after covering the costs of making the product,
which can then go towards fixed costs and profit.
(c) Calculate the number of Body Lotions that are needed to be sold in each
quarter to generate the quarterly target profit of R60,000.
Once we have the contribution margin per unit, we can calculate how many units they
need to sell to achieve a target profit of R60,000. The formula here is:
Number of units to achieve target profit=Contribution per unitFixed Costs+Target Profit
This will give us the number of units that need to be sold each quarter to hit that
R60,000 target.
(d) Calculate the margin of safety in Rand terms and percentage terms for the
quarter ended 30 September 2024.
The margin of safety tells us how much sales can drop before the business starts
making a loss. It’s the difference between actual sales and breakeven sales.
Margin of Safety=Actual Sales−Breakeven Sales
And in percentage terms, it’s:
Margin of Safety Percentage=Actual SalesMargin of Safety×100
This helps a business understand how much risk they have before they start losing
money.
(e) By what percentage must Body Lotions increase its selling price for its profit
for the quarter to increase by 100%?
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