PLEASE HELP!..! '_'

Question

SK Corporation has provided the following miscellaneous information regarding the operations of financial year 2020;

sh

Sales                                                                           10,000,000

Direct materials used                                                 4,000,000

Direct labour                                                              1,500,000

Fixed manufacturing overheads                                2,000,000

Fixed selling and administration expenses                1,000,000

Gross profit                                                                2,000,000

Net loss                                                                      500,000

Calculate:

(i) Factory cost of goods sold  

(ii) Variable factory overhead

(iii) Variable selling and administration expenses

(iv) Contribution margin in in shillings 

(v) Break-even point in shillings

Answer 1

Hello,

1. Your Cost of Good Sold would be Sales-Cogs=Gross Profit so 10,000,000-2,000,000=8,000,000

I rearranged the formula to be Sales - Gross Profit = Cost of Goods Sold

if 8,000,000 is Cost of Goods Sold We ca infer that that is comprised of

4M Direct Materials, 1.5M Labour, and the rest is Factor OH of 2.5M (Calculated by Cogs-DM-DL=2.5)

Nest FOH is 2.5 then 2 is Fixed OH and .5 is VOH for Sell&Admin we also need to find the total of fixed and variable.

Sales -Cogs = Gross profit -S&A=Net Loss

10-8=2-X=(.5) Solve for X we get 2.5 so then S&A is 2.5 with 1 of Fixed S&A and 1.5 of VS&A

then to turn it into the contribution margin format

Sales- Variable expense =CM-Fixed expenses = Net Loss

Total Variable Expenses = DM + DL + VS&A+VFoh = 7.5

Total Fixed Exp = Fixed FOH and Fixed S&A = 3

So we have the rest of the numbers

10-7.5 (Variable Exp)=2.5(Contribution Margin)-3 (Fixed S&A, and OH) = 0.5 net loss

notice that no matter which way you calculate it you still get the 0.5 net loss.

To find Break Even in Shillings

Take your Contribution Margin/Sales = .25 or 25%

Not take your Fixed Costs / 25% = 12,000,000 units