Question Tag: Break-even Analysis

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  • 15 Marks

PM – Nov 2014 – L2 – Q5 – Cost-Volume-Profit (CVP) Analysis

Calculate break-even points for Colour-Effects Limited's products under various revenue mixes and sales scenarios.

Colour-Effects Limited retails two products: Common and Executive traveling bags. The budgeted income statement for year 2015 is as follows:

Required:

(a) Calculate the break-even units, assuming that the planned revenue mix is maintained. (3 Marks)

(b) Determine the break-even point in units if only Common bags are sold and if only the Executive bags are sold. (6 Marks)

(c) Calculate the budgeted operating profit and break-even point if 200,000 units are sold, but only 20,000 are Executive bags. (6 Marks)

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  • 15 Marks

PM – May 2022 – L2 – SA – Q1A – Costing Systems and Techniques

Budgeted contribution, effect of product discontinuation, and sales to cover extra costs.

You are the Management Accountant of Dankoli Nigeria Limited, which specializes in the production of three products: Product 1, Product 2, and Product 3.

The following information is available for the first quarter of 2021:

Particulars Product 1 Product 2 Product 3
Sales units (’000) 225 376 190
Selling Price per unit N15.00 N13.00 N10.00
Variable costs per unit N7.80 N6.00 N5.00
Attributable fixed costs N275,000 N337,000 N296,000

General fixed overhead is apportioned on the basis of sales value. The budgeted general fixed overhead is N1,668,000.

Required:

  1. Calculate the budgeted contribution and profit of the Products and Company. (5 Marks)
  2. Calculate the budgeted profits assuming that Product 3 is discontinued with no effect on sales of the other products. (5 Marks)
  3. Calculate the extra sales in units and value required to cover the additional cost of advertising of N80,000 if such cost is treated as general fixed overhead. (5 Marks)

 

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  • 1 Marks

QTB – MAY 2017 – L1 – SA – Q2 – Mathematics.

A multiple-choice question calculating the variable cost per unit given total and fixed costs.

A company produces 16,000 units of a product. The total cost of producing these units is N60,000. If the fixed cost is N12,000, the variable cost per unit of the output is:

A. N7.00
B. N6.00
C. N5.00
D. N4.00
E. N3.00

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  • 1 Marks

QTB – MAY 2016 – L1 – SA – Q6 – Mathematics

Calculate break-even quantity given revenue and cost functions

The revenue function of a company is R = 48x + 3×2, and the cost function is
C = x2 + 46x + 180, where x is the number in units of item produced and
sold. Obtain the break-even quantity.

A. 8

B. 9

C. 10

D. 11

E. 12

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  • 1 Marks

MI – Nov 2015 – L1 – SA – Q11 – Cost-Volume-Profit Analysis

Calculates the break-even sales value given fixed costs and contribution/sales ratio.

What is the break-even sales in value?
N
Sales:                                                         650,000
Variable costs:                                        390,000
Total fixed costs:                                    120,000

A. N120,000
B. N140,000
C. N255,000
D. N300,000
E. N650,000

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  • 14 Marks

MI – Nov 2021 – L1 – SB – Q3a – Cost-Volume-Profit (CVP) Analysis

Calculate break-even point, contribution/sales ratio, sales value at break-even, and units to achieve profit.

PQRS is a manufacturing company in Abuja producing a single product called QR. The selling price of the product is ₦250 with a marginal cost of ₦160, while the fixed cost is ₦1,800,000 per annum.

You are required to calculate:

  1. Number of units to break even (2 Marks)
  2. Contribution/Sales ratio (2 Marks)
  3. Sales value at breakeven point (2 Marks)
  4. Number of units to be sold to achieve a profit of ₦450,000 (2 Marks)
  5. At a margin of safety of 50%, prepare a statement using the profit to be achieved (6 Marks)

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  • 1 Marks

MI – May 2017 – L1 – SA – Q11 – Cost-Volume-Profit (CVP) Analysis

Identify the definition of Margin of Safety in value.

The margin of safety in value is expected to be:
A. Sales less profit at break-even point
B. Sales less cost at break-even point
C. Cost less cost at break-even point
D. Sales less sales at break-even point
E. Profit less profit at break-even point

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  • 1 Marks

MI – May 2017 – L1 – SA – Q8 – Cost-Volume-Profit (CVP) Analysis

Calculate the break-even point in units.

What will be the Break-even point, in units, where Total fixed cost = N240,000, Selling price = N24 per unit, and Variable cost = N18 per unit?
A. 20,000 units
B. 30,000 units
C. 40,000 units
D. 50,000 units
E. 60,000 units

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  • 20 Marks

MI – May 2016 – L1 – SB – Q3 – Cost-Volume-Profit (CVP) Analysis

Perform various CVP calculations including break-even point, profit, margin of safety, and contribution for a product.

HEALTH-GRACE limited produces one standard product called Bambino Syrup which sells at ₦20.00 per bottle. The trading results for the six months ended June 30, 2015 were as follows:

Month Sales (Units) Profit / Loss (₦)
January 120,000 80,000
February 140,000 120,000
March 60,000 (40,000)
April 96,000 32,000
May 104,000 24,000
June 72,000 16,000

From the above information, you are required to calculate the following:

a. Break-even point in units and Naira value. (2 Marks)
b. Fixed cost. (2 Marks)
c. Variable cost per unit. (8 Marks)
d. Profit volume ratio. (2 Marks)
e. Contribution, assuming 70,000 bottles are sold. (2 Marks)
f. Margin of safety assuming 90,000 bottles are sold. (1 Mark)
g. The number of bottles to be sold to generate a profit after tax of ₦70,000 assuming the tax rate is 30%. (3 Marks)

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  • 10 Marks

QT – May 2017 – L1 – Q1c – Basic Mathematics

Analyze the profit function to find the break-even point and number of boxes to make a profit.

A paper-producing company has determined that its profit from selling x hundred boxes of envelopes is given by the expression:

Required:

i) Determine the number of boxes the company must sell to break even.
(5 marks)

ii) Determine the number of boxes the company must sell to make money.
(5 marks)

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  • 10 Marks

MA – May 2017 – L2 – Q1a – Introduction to capital budgeting,

Calculate the break-even rate for a taxi service investment considering a 5% annual cash flow increase over five years.

Kwame, after his National Service and with no hope of securing a job in the formal sector, has decided to run a taxi service. The following forecast has been made for the operation of a service between Abisim and Sunyani:

  1. Revenue totaling GH¢300 a week for 52 weeks in a year. This is net of fuel and other variable costs.
  2. Tyres: four pieces for a year at GH¢120 per unit.
  3. Maintenance and servicing: GH¢120 per month.
  4. Salaries: GH¢3,000 per year.
  5. Insurance: GH¢350 per year.

The net cash flow will increase at 5% per annum for the next five years due to inflation. The cost of the vehicle is estimated at GH¢28,000. The project appears quite profitable based on the NPV criteria using the Government policy rate of 26%. However, the banks are offering rates far higher than the policy rate.

Required:

You are to calculate the break-even rate for the project.

(10 marks)

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  • 12 Marks

MA – Nov 2016 – L2 – Q5a – Discounted cash flow

Calculate the NPV break-even point under different cost of capital scenarios and determine the project's duration based on given cash inflows.

DDB Limited has decided to set up a factory to process groundnuts into oil. The feasibility studies cost them GH¢35,000. The consultants have advised that the initial outlay will be GH¢250,000; however, they were unable to estimate the cash inflow due to the uncertain economic environment.

Required:
Using NPV as an appraisal technique, you are required to calculate:

i) The constant cash inflow needed to break even if the cost of capital is 15% and the project is to last for 10 years.

(4 marks)

ii) By how much should the cash inflow increase to break even if the cost of capital is increased to 20%. (4 marks)

iii) If the cash inflow is GH¢45,000, for how long should the project run to break even if the cost of capital is 15%.

(4 marks)

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  • 20 Marks

IMAC – July 2023 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis | Process Costing

Prepare the Process Account for Omicron vaccine production and calculate the break-even point and required units to achieve target profit before and after tax

a) Adom Ltd manufactures Omicron vaccine for the treatment of COVID-19 in Africa. The manufacturing process uses two raw materials (M & W) which are mixed in the proportions (2:3). Materials are priced: M = GH¢10 per kg and W = GH¢3.2 per kg. Normal weight loss of 5% of material input is expected during the process, and material losses recorded in the manufacturing process have no saleable value. At the end of production, 18,260 kg of Omicron vaccine were manufactured from 19,320 kg of raw materials. Conversion costs in the period were GH¢57,316. There was no work in process at the beginning or end of the period.

Required:
Prepare the Process Account of the Omicron vaccine for the period. (10 marks)

b) Manna Industries sold 150,000 units of its product at GH¢20 per unit. Variable costs are GH¢15 per unit (manufacturing cost of GH¢12 and selling expenses of GH¢3). Fixed costs are incurred uniformly throughout the year and amount to GH¢972,000, that is, manufacturing costs of GH¢600,000 and selling expenses of GH¢372,000.

Required:
i) Calculate the break-even point in units and Ghana cedis. (4 marks)
ii) Calculate the number of units that must be sold to earn an income of GH¢75,000 before income tax. (2 marks)
iii) Calculate the number of units that must be sold to earn an after-tax profit of GH¢100,000 if the income tax rate is 40%. (4 marks)

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  • 20 Marks

IMAC – NOV 2020 – L1 – Q1 – Cost-Volume-Profit (CVP) Analysis

Explain break-even point and margin of safety; calculate CVP metrics for Kack Ltd.

a) Explain the terms break-even point and margin of safety as used in cost-volume-profit (CVP) analysis in short term decision making. (4 marks)

b) Kack Ltd is a company which uses cost-volume-profit analysis for planning and control decisions. You have been given the following information for the just ended operational period:

Description Amount (GH¢)
Total revenue 3,600,000
Total cost 3,510,000
Variable cost 2,700,000

Required:
i) Variable cost/sales ratio. (1 mark)
ii) Contribution/sales (C/S) ratio. (2 marks)
iii) Break-even sales (in value). (2 marks)
iv) Margin of safety (in value). (1 mark)
v) Margin of safety (in percentage). (1 mark)
vi) The sales value which would yield a profit of GH¢270,000 assuming the C/S ratio and fixed costs remain unchanged. (3 marks)
vii) The sales value which would yield a profit of 15% of that sales value assuming the C/S ratio and the fixed costs remain unchanged. (3 marks)
viii) The break-even sales value if total fixed costs are reduced by GH¢180,000 while the selling price is reduced by 10%, assuming no changes in variable costs ratio. (3 marks)

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