The safety margin, Financial Management

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:
                                                                              £
Direct material                                                       200
Direct labor (20 minutes per unit)                          90/hour
Variable manufacturing overhead                              30
Variable selling expenses                                        50
Variable administrative expenses                             10

Fixed costs for the year ended 31 December 2010 were:
                                                                          £000
Fixed manufacturing                                              1,500
Fixed selling and distribution                                 1,700
Fixed administrative                                               800

The company produced and sold 275,000 units at £400 per unit.

In 2011, management has decided to enhance the selling price by 15% and to maintain the similar contribution margin ratio as last year. This increase in price is to meet an increase of £2,440,000 in fixed costs in 2011. The company has produced and sold the similar quantity in 2011 as last year.

1)    Calculate the break-even point in units for the two years 2010 and 2011 and comment on the re sults (10%)

2)    Calculate the safety margin for both years and comment on the results (5%)

3)    In the light of your answer to the previous two points, evaluate the company's policy in increasing the price by 15% in 2011 (5%).

Posted Date: 3/15/2013 2:22:23 AM | Location : United States







Related Discussions:- The safety margin, Assignment Help, Ask Question on The safety margin, Get Answer, Expert's Help, The safety margin Discussions

Write discussion on The safety margin
Your posts are moderated
Related Questions
explain the assumptions underlying Walter''s dividend model?

What is the Trade payable days (turnover) Year-end trade payables/Credit purchases (or cost of sales)x   365days This is the length of time taken to pay suppliers. The rat

Discuss about the Materiality An item can be considered material if its omission would reasonably influence the decisions of an addressee of report, a misstatement is material

Q. What is Allocation Registers? The object of allocation register is keep the heads of department of divisions districts and regions informed of the progress of expenditure by

CAPITALISATION RATE=0.01 EARNINGS PER SHARE(E)=10 ASSUME RATE OF RETURNS ON INVESTMENTS (R):15

Bond - One type of long-term PROMISSORY NOTE, often issued to the public as a SECURITY regulated under federal securities laws or state BLUE SKY LAWS. Bonds can eitherbe registered


Assignment II Describe capital budgeting techniques with formulas and examples.


The objective of the assignment is to develop an understanding of the factors that influence changes in the prices of stocks. *A person has $ 100,000 that they have to invest in s