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Accounting Fundamentals: Exam, Break-Even Analysis, Management Accounting

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Added on  2022-12-29

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This document is an exam on accounting fundamentals. It includes questions on break-even analysis, calculation of profit, limitations of break-even analysis, and the importance of management accounting. The exam also covers techniques used by management accountants to achieve the objectives of management accounting.

Accounting Fundamentals: Exam, Break-Even Analysis, Management Accounting

   Added on 2022-12-29

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Accounting fundamentals
exam
Accounting Fundamentals: Exam, Break-Even Analysis, Management Accounting_1
TABLE OF CONTENTS
Question 1........................................................................................................................................4
(a) Calculation of break-even point.............................................................................................4
(b) calculation of profit made on selling 75000 units..................................................................4
(c) Calculation of profit after making advertising campaign.......................................................4
(d) Limitations of break-even analysis........................................................................................5
Question 2........................................................................................................................................5
A) Importance of management accounting and the way it differs from financial accounting
provides........................................................................................................................................5
B) Three techniques that are used by management accountant can achieve objective of
management accounting...............................................................................................................6
REFERENCES................................................................................................................................8
Accounting Fundamentals: Exam, Break-Even Analysis, Management Accounting_2
Question 1
(a) Calculation of break-even point
break-even point in units = Total fixed costs / Contribution margin per unit
Total fixed costs = 350000
Contribution margin per unit = Sales price – Variable cost per unit
= 11 – 6 = 5
BEP (in units) = 350000 / 5 = 70000 units.
Break-even point (in sales) = Total fixed costs / Contribution * Sales price
Total fixed costs = 350000
Contribution = SP – VC = 11 – 6 = 5
Sales price = 11
BEP in sales = 350000 / 5 * 11 = 770000 pounds.
(b) calculation of profit made on selling 75000 units
Sales (75000 * 11) 825000
Less : variable cost (75000 * 6) (450000)
Contribution margin 375000
Less: Fixed costs (350000)
Profit 25000
(c) Calculation of profit after making advertising campaign
Additional fixed costs of advertising = 10000 pounds
Sales price after campaign = 13 per unit
Variable cost = 6 + 1 = 7 per unit
Sales = 80000 units
Sales (80000 * 13) 1040000
Less: Variable cost (80000 * 7) 560000
Contribution Margin 480000
Accounting Fundamentals: Exam, Break-Even Analysis, Management Accounting_3

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