Calculation of break-even points based on different sales mix assumptions and a-product – abandonment decision M Ltd manufactures three products which have the following revenue and costs (£2er unit). Product 1 2 _ 3 Selling price 2.92 1.35 2.83 Variable costs 1.61 0.72 0.96 Fixed costs: Product specific 0.49 0.35 0.62 General 0.46 0.46 0.46 Unit fixed costs are based upon the following annual sales […]

Acceptance of a contract JB Limited is a small specialist manufacturer of electronic components and much of its output is used by the makers of aircraft for both civil and military purposes. One of the few aircraft manufacturers has offered a contract to JB Limited for the supply, over the next twelve months, of 400 identical components. The data relating to the production of each […]

Calculation of break-even points and limiting factor decision-making You are employed as an accounting technician by Smith, Williams and Jones, a small firm of accountants and registered auditors. One of your clients is Winter plc, a large department store. Judith Howarth, the purchasing director for Winter plc, has gained considerable knowledge about bedding and soft furnishings and is considering acquiring her own business. She has […]

Decision on which of two mutually exclusive contracts to accept A company in the civil engineering industry with headquarters located 22 miles from London undertakes contracts anywhere in the United Kingdom. The company has had its tender for a job in north-east England accepted at £288 000 and work is due to begin in March. However, the company has also been asked to undertake a […]

In preparation for your meeting with Judith Howarth, you are asked to calculate: (a) the minimum number of beds to be sold if Brita Beds is to avoid making a loss; (b) the minimum turnover required if Brita Beds it to avoid making a loss. At the meeting, Judith Howarth provides you with further information: 1 The purchase price of the business is £300 000. […]

Calculation of minimum selling price You have received a request from EXE plc to provide a quotation for the manufacture of a specialized piece of equipment. This would be a one-off order, in excess of normal budgeted production. The following cost estimate has already been prepared: (£) Direct materials: Steel 10 m2 at £5.00 per sq. metre 50 Brass fittings 20 Direct labour Skilled 25 […]

Decision-making and non-graphical CVP analysis Fosterjohn Press Ltd is considering launching a new monthly magazine at a selling price of £1 per copy. Sales of the magazine are expected to be 500 000 copies per month, but it is possible that the actual sales could differ quite significantly from this estimate. — Two different methods of producing the magazine are being considered and neither would […]

Decision-making and non-graphical CVP analysis Mr Belle has recently developed a new improved video cassette and shown below is a summary of a report by a firm of management consultants on the sales potential and production costs of the new cassette. Sales potential: The sales volume is difficult to predict and will vary with the price, but it is reasonable to assume that at a […]

A division within Rhine Autos purchased a machine three years ago for £180 000. Depreciation using the straight line basis, assuming a life of six years and with no salvage value, has been recorded each year in the financial accounts. The present written-down value of the equipment is £90 000 and it has a remaining life of three years. Management is considering replacing this machine […]

Sunk and opportunity costs for decision-making Mrs Johnston has taken out a lease on a shop for a down payment of £5000. Additionally, the rent under the lease amounts to £5000 per annum. If the lease is cancelled, the initial payment of £5000 is forfeit. Mrs Johnston plans to use the shop for the sale of clothing, and has estimated operations for the next twelve […]