Accounting for Business: BEP, Contribution, Profit, Ratios

Accounting for business

Table of Contents
Accounting for business...................................................................................................................1
Question 2........................................................................................................................................3
Question 3........................................................................................................................................5
Gross profit ratio:.............................................................................................................................5
References......................................................................................................................................10

Question 2
a) Contribution per unit = £ [220 – 120] = £100
BEP [units] = Total fixed costs / Contribution per unit
= £1200000 / £100 = 12,000 units
C/S ratio = £100 / £220*100 = 45.45%
BEP [£] = Total fixed costs / C/S ratio = £1200,000 / 45.45% = £2640264
Budgeted profit = Budgeted contribution – Total fixed costs
= £100 x 25,000 units - £12,00, 000
= £25,00,000 - £220,000 = £1200,000
Margin of safety = 35,000 – 12,000 = 13,000 units
b) Profit required = £1500,000
Contribution required = Fixed costs + profit
= £1200,000 + £1500,000 = £2700,000
Sales volume required to make this profit and contribution
= Contribution required / Contribution per unit
= £2700,000 / £100 per unit = 27,000 units
Sales revenue required to make a profit of £100,000
= Total contribution required / C/S ratio
= £2700,000 / 45.45% = £1227150