Page 262 - BA2 Integrated Workbook - Student 2017

Fundamentals of Management Accounting

CHAPTER 13 – SHORT-TERM DECISION MAKING

13.1 A
Fixed costs
Breakeven point = ——–––––————
Contribution per unit

340,000
= ———— = 8,500 units
40

Contribution = selling price – variable costs
= $129 - $89 = $40

Fixed costs: $

Fixed overheads 120,000
Selling and distribution 140,000

Administration 80,000
––––––––

340,000
––––––––

13.2 B
Fixed costs + $40,000
Sales revenue for $40,000 profit = ———–––—————
C/S ratio

380,000
= ————
0.31

= $1,225,806
C/S ratio = 40/129 = 0.31

13.3 C

The contract requires 600kg of material. The 400kg which are in inventory are in
constant use and will therefore have to be replaced at the current purchase
price. The other 200kg will have to be purchased, also at the current purchase
price.

Therefore the relevant cost of the material is 600kg × $27 = $16,200

254