- 20 Marks
PM – May 2022 – L2 – SA – Q5 – Cost-Volume-Profit (CVP) Analysis
Analysis of Abayomi Plc's financial data to determine break-even sales and evaluate budget adjustments.
Question
Abayomi Plc produces and sells two major products, A and B. The budgeted income statement for the year to December 31, 2022 is given below:
The budgeted selling prices of the products are:
- A: ₦120
- B: ₦180
Required:
a. Determine the breakeven sales in units for each of the products, using the budgeted data. (6 Marks)
Now assume that the following changes are made to the budget:
(i) Unit selling price of product B is reduced to ₦160.
(ii) Direct material cost is expected to drop by 10% for product A and 20% for product B.
(iii) Direct labour costs for each product will increase by 10%.
(iv) Additional ₦456,000 will be spent on advertising.
(v) 80% of total revenue will be derived from product B.
Find Related Questions by Tags, levels, etc.
- Tags: Break-even Sales, Cost Analysis, Product pricing, Profitability
- Level: Level 2
- Topic: Cost-Volume-Profit (CVP) Analysis
- Series: MAY 2022