Accounting for Business and Managers

Introduction

Business Solution Services

2008 2009

Units Units

4,500 Sales 1,890,000 6,500 Sales 2,535,000

Opening Stock 0 opening Stock 0

Production 1,080,000 Production 1,612,000

1,080,000 1,612,000

Contribution 810,000 Contribution 923,000

Fixed Overheads -360,000 Fixed Overheads -400,000

Net Profit 450,000 Net Profit 523,000

Management accounting is defined as ‘'the provision of information to people within an organisation to help them make better decisions and improve the efficiency and effectiveness s of existing operations.''

Task 1 (a)

(b) Break Even analysis

C/S = Total Contribution/Total Sales

2008

1,890,000/810,000= 2.3

Break even = fixed cost/contribution to sales

360,000/2.3 = 156,521

So to break even the company will need to sell 156,521

2009

2,535,000/923,000 = 2.7

Break even = fixed cost/contribution to sales

400,000/2.7 = 148,148

So to break even the company will need to sell 148, 148

(c)

The sales levels that would have to be attained in 2009 in order to generate a profit equal to what was earned in 2008, the business will have to sell 4,846 units.

(d)

Fixed overhead + desired profit

Contribution per unit

=360,000 + 950,000/180 = 7, 277

Task 2 (1a) Absorption Costing

March April

Sales 61,250 98,000

Opening Stock 0 11,250