Penury Company offers two products. At present, the following represents the usual results of a month's operations: Product K Product L Combine Per Per d Атount Unit Атоunt Unit Атоunt Sales revenue $120,000 $1.20 $80,000 $0.80 $200,000 Variable expenses 60,000 0.60 60,000 0.60 120,000 Contribution margin $ 60,000 $0.60 $20,000 $0.20 80,000 Fixed expenses 50,000 Net operating income $ 30,000
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Compute for the following:
a. Break-even point in terms of dollars
b. Margin of safety in terms of dollars
c. The company is considering decreasing product K's unit sales to 80,000 and increasing product L's unit sales to 180,000, leaving unchanged the selling price per unit, variable expense per unit, and total fixed expenses. Would you advise adopting this plan?
d. Break-even point in terms of dollars of the new plan
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