Management Accounting
Sample Paper 3
Questions and Suggested Solutions
NOTES TO USERS ABOUT SAMPLE PAPERS
Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance
to students and their teachers regarding the style and type of question, and their suggested solutions, in
our examinations. They are not intended to provide an exhaustive list of all possible questions that may
be asked and both students and teachers alike are reminded to consult our published syllabus (see
www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.
There are often many possible approaches to the solution of questions in professional examinations. It
should not be assumed that the approach adopted in these solutions is the only correct approach,
particularly with discursive answers. Alternative answers will be marked on their own merits.
This publication is copyright 2011 and may not be reproduced without permission of Accounting
Technicians Ireland.
© Accounting Technicians Ireland, 2011.
2 INSTRUCTIONS TO CANDIDATES
In this examination paper the £ symbol may be understood and used by candidates
in Northern Ireland to indicate the UK pound sterling and the € symbol may be
understood by candidates in the Republic of Ireland to indicate the Euro.
Answer FIVE questions.
Answer all three questions in Section A. Answer ANY Two of THREE questions in
Section B.
If more than the required number of questions is answered in Section B, then only
the requisite number, in the order filed, will be corrected.
Candidates should allocate their time carefully.
All figures should be labelled, as appropriate, e.g. €, £, units etc.
Answers should be illustrated with examples, where appropriate.
Question 1 begins on Page 2 overleaf.
3 SECTION A
Answer All Questions
QUESTION 1
Gamble Ltd has noted a number of market fluctuations in relation to sales of two
specific products – Amber and Venus. They are concerned that their products are
appropriately costed and priced.
The company uses a cost mark up pricing policy and uses a pre-determined
overhead absorption rate based on direct labour hours. The rate is calculated at
the start of the year based on the following information: Production overhead
1,200,000
Direct labour hours
50,000
Machine hours
100,000
Set up hours
1,000
You have carried out preliminary investigations and have identified the following
additional product information :Amber
Venus
Direct materials
£250
£350
Direct labour hours
10
20
Machine hours
80
25
Set up hours
1
2
Mark up
50%
40%
Direct labour rate
£15
£15
Further analysis of production overheads and supporting information reveals the
following:-
Indirect
Materials
Supervision
Support Costs
Depreciation
Set up
£
50,000
Maintenance
£
50,000
Cutting
£
100,000
Assembly
£
100,000
50,000
-
50,000
25,000
160,000
120,000
145,000
180,000
120,000
50,000
TOTAL
£
300,000
340,000
340,000
220,000
1,200,000
You have been asked to analyse the information and make relevant calculations
using traditional and modern costing methods, to inform decisions on pricing.
4 QUESTION 1 (Cont’d)
Requirement
(a) Calculate the predetermined overhead absorption rate used by Gamble Ltd
at the start of the year.
2 marks
(b) Calculate the standard cost and the sales price of Amber and Venus, using
the predetermined overhead absorption rate.
6 marks
(c) Identify suitable alternate cost pools and cost drivers for Gamble Ltd.
2 marks
(d) Calculate an activity based overhead absorption rate.
4 marks
(e) Calculate the cost and the sales price of Amber and Venus using the activity
based overhead absorption rate.
6 marks
Total: 20 marks
QUESTION 2
ROBENS Ltd manufactures and sells an electrical component. The company have
had a good first year’s trading although they have struggled to manage cash flows
because of initial set up costs incurred. The bank balance at the start of Year 2 is
projected to be an overdraft of £85,000 and in preparation for a meeting with the
account manager you have gathered the following budgetary information:  The current sales price is currently €/£ 5.50 per unit and this is expected to
increase to €/£6.00 per unit at the start of Quarter 2. Sales are projected
for each quarter as follows: Year 1 Quarter 4
50,000 units
Year 2 Quarter 1
50,000 units
Quarter 2
40,000 units
Quarter 3
30,000 units
Quarter 4
70,000 units
 All sales are on credit and debts are settled in the quarter following sale.
Irrecoverable debts of 5% of total revenue are anticipated.

The company normally holds a closing inventory of 20,000 units at the end
of each quarter

The electrical components are produced in batches of 2,000. Each batch
requires 200 direct labour hours and 800 kg of raw materials. 5 QUESTION 2 (Cont’d) 
Direct labour is projected at a rate of €/£16.00 per hour for Quarter 1 and at
€/£ 16.50 thereafter.

Raw materials cost €/£5 per kg and are expected to increase by 5% with
effect from Quarter 3. The company has agreed an average of 90 days
credit with its main suppliers.
 General overheads are projected to be €/£25,000 per month.
Requirement
(a) Prepare a cash budget for ROBENS Ltd for Year 2, providing quarterly balances.
14 marks
(b) Prepare a report setting out:
- the benefits of good budgetary control;
- typical problems encountered in exercising budgetary control.
6 marks Total: 20 marks
QUESTION 3
The following information has been provided by OLYMICE Ltd in relation to a
particular product line for the month of December:
Materials Price Variance
19,000Adv
Materials Usage Variance
5,250 Fav
Labour Rate Variance
12,480Fav
Labour Efficiency Variance
19,200 Adv
Production output
12,000 units
Materials
£517,750 for 95,000 Kg
Labour
£486,720 for 62,400 hours
Requirement
(a) Using the information provided prepare a standard cost sheet for this
product.
14 marks
(b) Provide a possible explanation for the material and labour variances
reported.
6 marks
Total: 20 Marks
6 SECTION B
Answer any two of the following questions
QUESTION 4
Rich Fashions Ltd has carried out market research which indicates that the next
year will see a recession in sales demand. Projected sales for the months of
January, February and March are £20,000 per month representing 50% of
production capacity rising to £40,000 in April, May and June (75% of production
capacity). The following information has been ascertained
 Normal operational costs per annum are estimated as follows:
Capacity Level
50%
75%
100%
150,000
200,000
Direct Labour
100,000
Direct Material
75,000
112,500
150,000
Premises Overheads
51,000
62,500
65,000
Administration Costs
40,000
45,000
50,000
15,000
15,000
Miscellaneous Expenses
10,000
 Normal sales turnover would be £65,000 per month if the company is
trading at full capacity.
 Upon closing down, exceptional costs of £15,000 are anticipated. Restart
costs are estimated at £10,000, annual cost of maintaining buildings is
£5,000 and the retention of key personnel would cost £2,000 per month.
 The company premises, which have freehold ownership, are valued at
£600,000, but in the current climate, it could take up to a year to sell at this
price.
Requirement:
Prepare a report to the Directors of Rich Fashions Ltd advising them on whether
they should cease business for any period within the next six months and to advise
them of other factors that need to be taken into consideration.
20 marks QUESTION 5
You have been asked by you manager to assist with the induction of a new member
of the finance team. After a number of days, they approach you with a number of
queries about terms which have been used which they are not familiar with. These
include: Integrated cost accounting system
 Limiting factors
 Flexible budgets
 Cost codes
7 QUESTION 5 (Cont’d)


Sensitivity analysis
Sunk costs
Conscious of the importance placed upon clear guidance by your manager, and in
order to provide material for future reference, you decide that the best approach is
for you to provide your prodigy with a written paper.
Requirement
Prepare a briefing paper setting out an explanation and outlining the practical
context of each of the above terms.
20 marks QUESTION 6 INVAR Ltd is reviewing is portfolio of products and has provided you with the
following flexible budget information in relation to budgeted sales for the product
VART 1
Flexed Budget 1
Flexed Budget 2
Sales (units)
40,000
50,000
Sales income
£480,000
£600,000
Net Profit / (Loss)
(£15,000)
£15,000
In order to assist the sales manager with further analysis you are asked to repare a
number of calculations relative to this product line.
Requirement
(a)
Calculate the fixed costs attributable to VART 1
4 marks
(b)
Calculate the Contribution/Sales ratio (%) for VART 1
4 marks
(c)
Explain the term ‘breakeven ‘ and calculate the breakeven point,
expressed in both units and sales turnover 6 marks
(d)
Provide an example of a breakeven chart
2 marks
(e)
The company is considering a policy of requiring a target profit of 10% of
turnover. Calculate the activity required to generate this target profit.
4 marks
Total: 20 marks 8 Suggested Solutions
QUESTION 1 a) GAMBLE Ltd
Pre-determined Overhead Absorption Rate
Production Overhead
Direct Labour Hours
£1,200,000.00
50.000 Hrs
Total Overhead per Cost Centre
Total no of units of Absorption base
-
1,200,000.00
50,000
= £24.00 per direct labour hour. b) Standard Cost & Selling Price
Direct Materials
Direct Labour
Production Overhead
Standard Price
Mark Up
Selling Price
c) Cost Pools Set Up Costs
Maintenance
Cutting
Assembly
£
Amber
£
Venus
250.00
150.00
240.00
640.00
350.00
300.00
480.00
1130.00
(50%) 320.00
£960.00
(40%) 452.00
£1582.00
Cost Drivers Set Up Hours
Machine Hours
Machine Hours
Direct Labour Hours
9 d) Indirect
Materials
Supervision
Support Costs
Depreciation
Absorption Overhead Rate Set Up
50,000
Maintenance
50,000
Cutting
100,000
Assembly
100,000
50,000
100,000
£100.00 per Set up Hr 50,000
25,000
125,000
£1.25 per Machine Hr 160,000
120,000
145,000
525,000
£5.25 per Machine Hr 180,000
120,000
50,000
450,000
£9.00 per Direct Labour Hr e) Gamble Ltd £
Amber
£
Venus
Direct Materials
250.00
350.00
Direct Labour
150.00
300.00
Set Up Cost
100.00
200.00
Maintenance costs
100.00
31.25
Cutting Costs
420.00
131.25
Assembly Costs
90.00
180.00
Standard cost
1110.00
1192.50
(40%) 477.00
Mark Up
(50%) 555.00
Selling Price
£1665.00
£1669.50
QUESTION 2 (a) ROBENS LTD – CASH BUDGET YEAR 2 Quarter 2
Quarter 3
Quarter 4
TOTAL
Quarter 1
£
£
£
£
£
Cash Inflows Receivables 261,250
261,250
228,000
171,000
921,500
Cash Outflows Direct labour
80,000
64,000
49,500
309,000
cost
115,500
Supplier
100,000
100,000
80,000
343,000
Payables
63,000
10 Overheads
75,000
255,000
75,000
239,000
75,000
204,500
75,000
253,500
300,000
952,000
Net
6,250
22,250
23,500
(30,500)
Inflows/Outflows
(82,500)
Opening Balance
(85,000)
(78,750)
(56,500)
(33,000)
(85,000)
Closing Balance
(78,750)
(56,500)
(33,000) (115,500) (115,500)
Sales Workings
Quarter 4
Quarter 1
Quarter 2
Quarter 3
Quarter 4
(Yr1)
Sales
50,000
50,000
40,000
30,000
70,000
Volume
Sales Price
5.50
5.50
6.00
6.00
6.00
Sales
275,000
275,000
240,000
180,000
420,000
Income
Bad debt
(13,750)
(13,750)
(12,000)
(9,000)
(21,000)
261,250
261,250
228,000
171,000
399,000
Receivables
261,250
261,250
228,000
171,000
income
Production Calculations
Quarter 2
Quarter 3
Quarter 4
Quarter 4 Quarter 1
(Yr1)
Sales Volume
50,000
40,000
30,000
70,000
Closing stock
20,000
20,000
20,000
20,000
20,000
Opening Stock
(20,000)
(20,000)
(20,000)
(20,000)
Production
50,000
50,000
40,000
30,000
70,000
No of batches
25
25
20
15
35
Direct labour
5,000
4,000
3,000
7,000
hrs
Direct labour
80,000
64,000
49,500
115,500
cost
Raw
20,000
20,000
16,000
12,000
28,000
materials(kg)
Raw mats cost
100,000
100,000
80,000
63,000
147,000
Supplier
100,000
100,000
80,000
63,000
payable
11 (b) REPORT ON BUDGETARY CONTROL & TYPICAL PROBLEMS The benefits of budgetary control include:
 Improved planning and co-ordination
The preparation of formal budget plans requires detailed planning, which in turn
requires the co-ordination of activities within a section or department or on an
organization-wide basis.
 Clarification of authority and responsibility
Budget preparation requires clarification of manager responsibilities. A budget
can provide clear guidelines for managers and translate organizational
objectives into specific tasks related to individual managers.
 Communication
As the budgetary process will involve all levels of management, it provides a
vehicle for communication – and ultimately should be communicated to all staff
 Motivation
The process of setting targets and comparing actual results with budget can be
a motivating factor for staff, if correctly handled by management. This may
include participation to achieve goal congruence.
 Control
Similarly, variance reporting on deviations and from budget systematic
monitoring can assist with control in an organization and allow corrective action
to be taken.
 Efficiency
Management by exception techniques facilitated by budgeting can result in
more efficient use of manager time.
 Integration
The integration of budgets can assist with cashflow and working capital
management
Typical problems which can arise in exercising budgetary control include:
 Measuring change
Variance information may arise because of various changing circumstances
and/or poor forecasting
 Market conditions
Budgets are often developed internally and may not respond to changing
external market circumstances
 In-flexibility
Well documented plans can be a contributory factor to inertia and a lack of
flexibility with an organization
 Human aspects
Budgetary systems which are not well communicated can cause employee
relations difficulties and impact on the morale of the organization
12 QUESTION 3 (a) Standard Cost Sheet – Olymice Ltd
Materials
8kg @ £5.25/kg
Labour
5 hours @ £8/hr
Unit
£
Total
£
42.00
504,000
40.00
480,000
£82.00
984,000
Workings:
DATA 95,000 Kg @ £5.45 = £517,750 62,400 hrs @ £7.80 = £486,720 Methodology ­ Apply data to variance formulae to calculate inputs
Assume – Actual and Standard production = 1200 units Materials Price Variance
(Actual Price – Standard Price) x Actual Quantity
(5.45 – x ) = 0.20 x 95,000= £19,000 Adv
x = £5.25 per kg
Materials Usage
(Actual Quantity – Standard Quantity ) x Standard
Price
(x – 95,000) x 5.25 = 5,250 Fav
x = 96,000
96,000/12,000 = 8 kg per unit
Labour Rate
(Actual Rate – Standard Rate ) x Actual Hours
(7.80 – x) = 0.2 x 62,400 = 12,480 Fav
x = £8 per hour
Labour Efficiency Variance
(Actual Hours – Standard Hours) x Standard Rate
(62,400 – x) x 8.00 = 19,200 Adv
x = 60,000
60,000/12,000 = 5 hours per
unit
(b) Material Variances Olymice Ltd may have sourced more expensive, better quality materials for
production. Accordingly these cost more, resulting in the significant adverse price
13 variance of £19,000. However there has been less usage (perhaps less wastage or
less faults) with a favourable usage variance of £5450.
Labour Variances
Olymice Ltd’s adverse labour efficiency variance of £18,720 could be attributable to
less skilled or experienced staff that have proved to be cheaper to employ, hence
the favourable labour rate variance, but have taken longer to do the job.
Section B
Question 4 Rich Fashions Ltd 1. Position if Production continues for 3 months Sales
£ 60,000
Cost of Sales & Operations
Net Loss
69,000
9,000
2. Position if Production is continued for the next 6 months Sales
Cost of Sales & Operations
£ 180,000
165,000
Net profit 15,000 3. Position if production is ceased for three months then restarted in April Sales
120,000
Cost of Sales & Operations
Exceptional costs
Restart Costs
Maintenance Costs (3 months)
Retention of key personnel (3 months)
Net Loss
96,000
15,000
10,000
1,250
6,000
8,250
14 4. Position if Production ceases immediately £ Exceptional costs 15,000 Maintenance Costs 5,000 Loss of six months profits 15,000
Loss 35,000 Company premises could be sold realising value £600,000 Opportunity cost ­ on going loss of potential profits per annum £300,000
Rich Fashions Ltd From the calculations above you can clearly see the position of Rich Fashions Ltd
after considering the four main options available to them in the short term.
 If production is continued the company will make a loss of £9,000 over the
next three months of trading, but will return a modest profit of £15000 if
sales recover to the projected position after three months.
 If the company closes down for three loss making months and then restarts
the company’s loss would increase to £8,250 over the six month period due
to the exceptional and restart costs.
 Another more radical option is for the company to cease production
immediately and permanently. This incurs an immediate loss of £23,000
but would allow the company the opportunity to realise the value of their
buildings – estimated to be £600,000. The opportunity cost of this is the
potential profits of up to £300,000 per annum if the company is operating at
full capacity.
Therefore I would advise Rich Fashions to continue trading for six months (as this
provides the only positive financial result) and review the position at that stage in
light of market conditions.
Rich Fashions should also take the following factors into consideration;





Loss of customers to competitors during any period of closure – short term
or long term. These customers might be reluctant to return to the company
when they reopened.
If they lay off their existing experienced staff they will very hard to replace
and any new staff will need to be trained.
Rich Fashions will not be ready to take full advantage of the anticipated
production capacity increase demand as the factory has to be restarted and
the new staff will not have the same skills as the old staff.
Staff morale will be lowered due to recent events and this will in turn affect
customer confidence
Other market conditions including property values
15 
Scope for developing new markets or new products to address under
capacity issues
 Reliability of market information and projections
Workings Sales Calculations
Jan, Feb Mar
Apr, May, June
Cost of Sales Calculation
20,000 x 3
40,000 x 3
Capacity Level
50%
Direct Labour
100,000
Direct Material
75,000
Premises Overheads
51,000
Administration Costs
40,000
Miscellaneous Expenses
10,000
Per Annum
£276,000
Per month
£23,000
Jan, Feb Mar
23,000 x 3
Apr, May, June
32,000 x 3
Normal Profits – if trading at 100% capacity
Sales
Costs
Profit – per month
65,000
40,000
25,000
Profits – per annum
300,000
16 60,000
120,000
180,000
75%
150,000
112,500
62,500
45,000
15,000
£384,000
£32,000
69,000
96,000
165,000
100%
200,000
150,000
65,000
50,000
15,000
£480,000
£40,000
QUESTION 5 Integrated cost accounting system An integrated accost accounting system is one where the cost and financial
accounts are kept in the same set of books.
This system avoids the need for
separate set of books for financial and costing purposes but is able to provide or
meet the information requirement for costing plus financial accounts. There are a
number of requirements for the successful operation of an Integrated Cost
Accounting System. These include: Top management decision on the extent of integration of the two set of
books re: to integrate until the stage of primary cost or factory cost or full
integration.
 A suitable coding system must be developed to serve the purposes of both
financial and cost accounting
 An agreed routine, with regard to the treatment of provision for accruals,
prepaid expenses, other adjustments necessary for the preparation of
interim accounts
 Proper coordination should exist between the staff responsible for the
financial and cost aspect of the accounts
Basically, in an integrated cost accounting system, the financial and cost
transactions are recorded in an integrated ledger which is self balancing. The
advantages are as follows:
 Savings in clerical work because one set of accounts is kept thereby
reducing clerical costs;
 No need to reconcile financial and cost profits;
 No confusion arises from different stock valuations, method of depreciation
and profits
 The probability of error is less because recording takes place in one set of
accounts and
 Information produced on an integrated system is quicker, thus helping
management in decision making
Limiting factors A limiting factor prevents a company from expanding to infinity. Limiting factors
affect budgeting and they must be considered to ensure that the budgets can be
attained. Examples are: raw material shortage, labour shortage, insufficient
production capacity, low demand for products, lack of capital, etc
The principal budget factor is the factor that limits the activities of an organization
because such a limit/constraint will have a pervasive effect on all plans and
budgets. The limiting factor must be identified during the budget preparation
process
Examples of principal budget factors are: Shortage of labour material
 Shortage of production capacity.
 Shortage of finance or working capital
17  Shortage of demand for goods or services.
Flexible budgets A flexible budget is a budget which is designed to change in accordance with the
level of activity attained.
It is also known as Variable budget as the budget recognises the difference in cost
behaviour namely fixed and variable costs in relations to fluctuations in output or
turnover. The budget is designed to change appropriately with such fluctuation.
For a fixed budget, the budget remains unchanged irrespective of the level of
activity actually attained.
The fixed budget is prepared based only on one level of output.
Therefore, if the level of output actually achieved differs considerably from that
budgeted, large variances will arise.
18 The difference between Fixed and Flexible Budget are:
 For a fixed budget, the figures are for a SINGLE level of activity while a
flexible budget is prepared for DIFFERENT levels of activity;
 Under fixed budgets, managers are held responsible for variances not under
his control ( both fixed and variable cost);
 The fixed budget is never able to assess properly the efficiency and actual
performance of the manager.
For example, a fixed budget is set with a planned 8,000 hours but an actual 10,000
hours are recorded, from both the motivational or control point, it is difficult to
gauge the efficiency of the managers who are involved in the manufacture of the
output at that actual level;
The flexible budget allows more meaningful comparison as it flex’s to the actual
volume. It computes what costs should have been for the actual level of activity
and
 The flexible budget has the advantage of assisting the managers deal with
uncertainty by allowing them to see the expected outcomes for a range of
activity;
Cost codes Job Cost Management modules enable you to effectively manage jobs from revenue
and cost perspective. To do this effectively, we allow for a work breakdown, which
we refer to as a cost code. User defined cost codes can be established by type of
job.
Cost Analysis by cost-code links each class of expense with budget. These reports
may be selected by job range, open or complete jobs, department, or division.
Features:
 Cost codes are user defined. They may be customized to your needs and
preferences. You may set up a different code structure for each job.
 Balancing your jobs to general ledger is easy because nothing hits job cost
with out hitting general ledger.
 Reporting of labour burden cost allows you to have a more accurate job cost
by allowing you to see not only what you pay an employee, but also what
he/she is costing you in invisible cost.
Sensitivity analysis Sensitivity analysis is implemented to analyze the various risks to the project by
looking at all aspects of the project and their potential impact on the overall goal.
Knowing the level of impact various elements have on a project can assist
management with setting priorities to more quickly achieve the end result.
Sensitivity analysis facilitates comparisons between the various elements to quickly
discern which risks are worth taking. Project management can use sensitivity
analysis to create priorities in dealing with elemental risks to the project. By
knowing which affects the objective the most, more efforts can be concentrated to
lessen that risk. Lowering risk potential allows for projects to flow in a smoother
fashion with fewer unexpected delays.
19 Sunk Costs: Sunk cost is a past cost not directly relevant in decision making.
 If we refer to relevant costs, the main feature is that we are referring to
future costs.
 As Sunk costs are cost which have already been incurred therefore it should
be ignored when making any decisions.
 Sunk costs are irrelevant costs which are simply costs that will not affect the
decision.
 By analysing these types of sunk costs, management will be wasting their
time and efforts as these costs do not affect the decision they are going to
make.
In short term decision making, fixed costs are generally regarded as sunk costs.
Say Company A has a factory which produced product A. Earlier last year it has
extended and renovated the factory at an additional cost of £200,000 to produce
product B. Now management is thinking of whether to let outsiders produce
product B or not. Should this £200,000 be considered?
£200,000 is sunk costs which existed as a result of previous decision.
Sunk costs are costs which cannot be recovered once they have been incurred.
Sunk costs are sometimes contrasted with variable costs, which are the costs that
will change due to the proposed course of action, and prospective costs which are
costs that will be incurred if an action is taken. Only variable costs are relevant to
a decision.
20 QUESTION 6 (a) Fixed Costs Working Sales income Variable Cost Contribution Fixed Costs Flexed Budget 1 Flexed Budget 2 Per unit £ £ £ 480,000 600,000 12 360,000 450,000 9 120,000 135,000 150,000 135,000 3 Net Profit / (Loss)
(£15,000)
£15,000
 The increase in sales from Flexed Budget 1 to Flexed Budget 2 is 10,000
units. This results in increased sales revenue of £120,000 – hence the sales
price per unit can be calculated at £12.
 The increase in profits from Flexed Budget 1 to Flexed budget to is £30,000.
As only variable costs increase – these can be calculated at £90,000
(£120,000 - £30,000) – which is £9 per unit.
 The increase in profit of £30,000 represents the additional contribution of
10,000 units of additional sales – hence the contribution per unit is £3.
 Fixed costs can be calculated as the balancing figure in either Budget as
follows:
 Contribution – Net Profit = Fixed Costs
Fixed Costs = £135,000 (b) Contribution/Sales ratio 3 x 100 = 25% Contribution per unit x 100 = Sales price per unit 12 (c ) Breakeven Point Breakeven Point is the term used in cost volume profit analysis for the point at
which neither profit nor loss occurs. At breakeven, contribution exactly covers
the fixed costs of an organisation or unit. The breakeven point can be
expressed in the number of sales units or in sales revenue.
To find the number of units required to breakeven, the fixed cost is divided by
the contribution per unit. In a multi product situation the break even revenue
is calculated by dividing fixed cost by the contribution sales value
Fixed Costs Contribution per unit = 135,000 = 3 21 45,000 units d) Breakeven Chart Please refer to page 203 2010/2010 Management Accounting Manual. (e) The level of activity which will yield a profit of 10% of turnover Calculation of Revised Contribution/Sales Ratio Original C/S ratio 25% Profit requirement 10% Revised C/S Ratio 15% (for calculation of target profit) Revised breakeven calculation to achieve target profit calculation Fixed Costs = 135,000 = £900,000 = 75,000 units Revised C/S ratio 15% sales 22