Able Plus Inc. manufactures and sells wheelchairs. The company sales figures were at £690,000 the last quarter. The investment cost in plant and machinery were at £245,000. The company was able to sell each wheelchair at the cost of £20, out of which about £12 could be attributed to variable expenses.
1) Compute the Contribution margin and Contribution margin ratio?
2) Estimate the quarterly break-even point in units sold and in sales pound?
3) How many units would have to be sold each quarter to earn a target profit of £100,000?
4) Compute the company’s margin of safety in both pound and percentage terms?
5) If the sales increase by £60,000 in the next quarter and there is no change in fixed expenses, by how much % age do you expect quarterly profits to increase?
6) Draw a CVP graph for volume range of 0 units to 60,000 units with an increment of 10,000 units. Indicate the break-even point and profit and loss area.
