Divine dvds ltd manufactures and sells dvds price and cost

Question

Question 3 Basic CBP relationships: Manufacturer

Divine DVD's Ltd manufactures and sells DVDs. Price and cost data are as follows:

In the following requirements ignore income taxes

Required:

1. What is Divine DVD's break-even point in units?

2. What is the company's break-even point in sales value (kina).

3. How many units would Divine DVDs have to sell in order to earn a profit of K260 000?

4. What is the firm's safety margin?

5. Management estimate that direct labour costs will increase by 8 per cent next year. How many units will the company have to sell next year to reach its break-even point?

6. If Divine DVDs' direct labour costs do increase by 8 per cent, what selling price per unit of product must it charge to maintain the same contribution margin ration?

Question 4 Basic CVP relationships: income taxes: manufacturer

Refer to the data given in Question 2. Now assume that Divine DVDs pays income taxes of 30 per cent.

Required:

1. What is Divine DVDs' break-even point in units?

2. What is the company's break-even point in sales value?

3. How many units would Divine DVDs gave to sell in order to earn a profit of $300 000 after tax?

4. What is the firm's safety margin?

5. If Divine DVDs' direct labour costs increase by 8 per cent, what selling price per unit of product must it charge to maintain the same contribution margin ratio?