BBAC501 Management Accounting, CIC Higher Education, Australia
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Question 1: Determine the budgeted net profit for the year 2020.
Answer: The following table shows the necessary calculations:
|
Units sold
|
3,000.00
|
2,400.00
|
3,600.00
|
3,000.00
|
|
|
Particulars
|
BK
|
SK
|
KL
|
HPKL
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
3,60,000.00
|
3,24,000.00
|
5,40,000.00
|
5,40,000.00
|
|
|
|
|
|
|
|
|
|
Less: variable costs:
|
|
|
|
|
|
|
Variable manufacturing costs
|
1,80,000.00
|
1,80,000.00
|
2,88,000.00
|
3,30,000.00
|
|
|
Variable selling and admin costs
|
90,000.00
|
60,000.00
|
1,44,000.00
|
1,20,000.00
|
|
|
|
|
|
|
|
|
|
Contribution
|
90,000.00
|
84,000.00
|
1,08,000.00
|
90,000.00
|
|
|
|
|
|
|
|
|
Question 2: Assuming the sales mix remains constant throughout 2020, determine how many packs of each product must be sold in order to breakeven.
Answer: The following table shows the necessary calculations:
|
Units sold
|
3,000.00
|
2,400.00
|
3,600.00
|
3,000.00
|
|
|
Particulars
|
BK
|
SK
|
KL
|
HPKL
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
3,60,000.00
|
3,24,000.00
|
5,40,000.00
|
5,40,000.00
|
|
|
|
|
|
|
|
|
|
Less: variable costs:
|
|
|
|
|
|
|
Variable manufacturing costs
|
1,80,000.00
|
1,80,000.00
|
2,88,000.00
|
3,30,000.00
|
|
|
Variable selling and admin costs
|
90,000.00
|
60,000.00
|
1,44,000.00
|
1,20,000.00
|
|
|
|
|
|
|
|
|
|
Contribution
|
90,000.00
|
84,000.00
|
1,08,000.00
|
90,000.00
|
|
|
|
|
|
|
|
|
|
Annual fixed costs
|
|
|
|
|
3,10,000.00
|
|
Divided by contribution per unit
|
30.00
|
35.00
|
30.00
|
30.00
|
125.00
|
|
|
|
|
|
|
|
|
Break even units
|
|
|
|
|
2,480.00
|
|
|
|
|
|
|
|
|
Break even units/total amount of contribution*contribution per unit
|
595.20
|
694.40
|
595.20
|
595.20
|
|
|
|
|
|
|
|
|
|
Break even units
|
595.00
|
694.00
|
595.00
|
596.00
|
2,480.00
|
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Question 3: Answer the following items for Australian Paper and interpret the results:
a. Calculate the projected safety margin in units for the year 2020 and explain the importance of this information for Australian Paper.
b. Compute the projected safety margin in sales dollars for the year 2020 and interpret the meaning of your answer.
Answer: The following table shows the necessary calculations:
|
Units sold
|
3,000.00
|
2,400.00
|
3,600.00
|
3,000.00
|
12,000.00
|
|
Particulars
|
BK
|
SK
|
KL
|
HPKL
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
3,60,000.00
|
3,24,000.00
|
5,40,000.00
|
5,40,000.00
|
|
|
|
|
|
|
|
|
|
Less: variable costs:
|
|
|
|
|
|
|
Variable manufacturing costs
|
1,80,000.00
|
1,80,000.00
|
2,88,000.00
|
3,30,000.00
|
|
|
Variable selling and admin costs
|
90,000.00
|
60,000.00
|
1,44,000.00
|
1,20,000.00
|
|
|
|
|
|
|
|
|
|
Contribution
|
90,000.00
|
84,000.00
|
1,08,000.00
|
90,000.00
|
|
|
|
|
|
|
|
|
|
Break even units
|
595.00
|
694.00
|
595.00
|
596.00
|
2,480.00
|
|
|
|
|
|
|
|
|
Projected safety margin in units
|
2,405.00
|
1,706.00
|
3,005.00
|
2,404.00
|
9,520.00
|
|
|
|
|
|
|
|
|
Projected safety margin in dollars
|
2,88,600.00
|
2,30,310.00
|
4,50,750.00
|
4,32,720.00
|
14,02,380.00
|
The main purpose of calculation of safety margin is the fact that the company would know the number of units that it is selling over and above the break-even units. These are the units that the company is selling for the purposes of earning profits since the level of the break-even units is a no loss no profit situation (Study, 2019).
Question 4: a. Taking into accounting the above change of circumstances, determine how many packs of each product should Australian Paper produce and sell in order to breakeven in the year 2020.
Answer: The following table shows the necessary calculations:
|
Units sold
|
3,000.00
|
2,400.00
|
3,600.00
|
3,000.00
|
12,000.00
|
|
Particulars
|
BK
|
SK
|
KL
|
HPKL
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
3,60,000.00
|
3,24,000.00
|
5,40,000.00
|
5,40,000.00
|
|
|
|
|
|
|
|
|
|
Less: variable costs:
|
|
|
|
|
|
|
Variable manufacturing costs
|
1,80,000.00
|
2,39,400.00
|
2,88,000.00
|
3,30,000.00
|
|
|
Variable selling and admin costs
|
90,000.00
|
60,000.00
|
1,44,000.00
|
1,20,000.00
|
|
|
|
|
|
|
|
|
|
Contribution
|
90,000.00
|
24,600.00
|
1,08,000.00
|
90,000.00
|
3,12,600.00
|
|
|
|
|
|
|
|
|
Fixed costs
|
|
|
|
|
3,18,600.00
|
|
|
|
|
|
|
|
|
Contribution per unit
|
30.00
|
10.25
|
30.00
|
30.00
|
100.25
|
|
|
|
|
|
|
|
|
Break even units
|
|
|
|
|
3,178.05
|
|
|
|
|
|
|
|
|
Break even in units
|
951.04
|
324.94
|
951.04
|
951.04
|
3,178.05
|
|
|
|
|
|
|
|
|
Old break even units
|
595.00
|
694.00
|
595.00
|
596.00
|
|
|
|
|
|
|
|
|
|
Sensitivity
|
59.84%
|
-53.18%
|
59.84%
|
59.57%
|
|
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b. Assume the maximum demand for each type of product could reach 4,000 packs for 2020. However, the realistic estimate of maximum total number of packs that Australian Paper can produce is 13,000 due to limited financial resources. Australian Paper is targeting to maximise its profitability for 2020 by manipulating its sales mix. For this reason, the senior accountant has asked your team to come up with a proposed sales mix (or new proportion) for each of the four products. Provide explanation for your proposed sales mix.
Answer: The following table shows the necessary calculations:
|
Units sold
|
4,000.00
|
4,000.00
|
4,000.00
|
4,000.00
|
16,000.00
|
|
Particulars
|
BK
|
SK
|
KL
|
HPKL
|
|
|
|
|
|
|
|
|
|
Sales revenue
|
4,80,000.00
|
5,40,000.00
|
6,00,000.00
|
7,20,000.00
|
|
|
|
|
|
|
|
|
|
Less: variable costs:
|
|
|
|
|
|
|
Variable manufacturing costs
|
2,40,000.00
|
3,99,000.00
|
3,20,000.00
|
4,40,000.00
|
|
|
Variable selling and admin costs
|
1,20,000.00
|
1,00,000.00
|
1,60,000.00
|
1,60,000.00
|
|
|
|
|
|
|
|
|
|
Contribution
|
1,20,000.00
|
41,000.00
|
1,20,000.00
|
1,20,000.00
|
4,01,000.00
|
|
|
|
|
|
|
|
|
Contribution per unit
|
30.00
|
10.25
|
30.00
|
30.00
|
|
|
|
|
|
|
|
|
|
|
1
|
4
|
2
|
3
|
|
|
|
|
|
|
|
|
|
Product
|
Number of units
|
Contribution per unit
|
Total contribution
|
|
|
|
|
|
|
|
|
|
|
BK
|
4,000.00
|
30.00
|
1,20,000.00
|
|
|
|
SK
|
1,000.00
|
10.25
|
10,250.00
|
|
|
|
KL
|
4,000.00
|
30.00
|
1,20,000.00
|
|
|
|
HPKL
|
4,000.00
|
30.00
|
1,20,000.00
|
|
|
|
|
|
|
|
|
|
|
Total
|
13,000.00
|
|
3,70,250.00
|
|
|
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