Question
O'Brien Ltd manufactures door handles.
The following is the proposed annual budget for the coming year:
The monthly production and sales units are
You are required to calculate the following:
a Contribution for the year
b Contribution per unit.
c Contribution Sales ratio
d Breakeven point in units
e Margin of safety
f Sales revenue that will yield a profit of
marks
Each question carries equal marks
g Explain the term 'Fixed Cost' in relation to a production budget.
marks
h Give one example of a 'Fixed Cost' that O'Brien Ltd might incur.
marks
i Prepare a clearly labelled breakeven chart, showing the breakeven point, margin of
safety and expected profit.
j The management of are trying to decide whether to make or buy the packaging in which
the door handles are wrapped for delivery.
Note and explain any four qualitative factors that would need to be considered before
making any decision.
