Engine Ltd manufactures engines for speed boats. Its popular engine called ignite is currently under...
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Engine Ltd manufactures engines for speed boats. Its popular engine called ignite is currently under review. Cost and revenue data, based on sales of 5,000 units, is given below: The cost of goods sold consists of $1 000 000 variable expense with the balance being fixed. Selling and administration expense consists of $250 000 variable expense with the balance being fixed. Required: a) Restate the above income statement using the contribution income statement format. (3 marks) b) Calculate the break-even point in units. (2 marks) c) Calculate the margin of safety at the present sales level in dollars. (2 marks)d) Engine Ltd received an order for 50 units at a price of $420.00. There will be no increase in fixed costs and variable costs on the 50 units will be reduced by $1.50 per unit in packaging costs. The company has excess capacity to produce the order. Determine the projected increase or decrease in profit from the order. (2 marks) e) Discuss the weaknesses of the CVP analysis technique as a financial planning tool. Can flexible budgets be used to overcome its weaknesses? Explain. (Word limit: 200 words) (2 marks)
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