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Management Accounting


QUESTION 1: (10 marks) Minitech Ltd’s projected profit for 2016 is $500,000, based on a sales volume of 100,000 units. Minitech Ltd sells USB flash drive for $15 each. Variable costs consist of the $5 purchase price and a $1 shipping and handling cost. Minitech’s annual fixed costs are $300,000. REQUIRED: a) Calculate Minitech Ltd’s break-even point in unit sales and dollars. b) Calculate Minitech Ltd’s margin of safety in units. c) Calculate Minitech Ltd’s profit for 2016 if there is a 10% increase in projected unit sales. d) For 2016, management expects that the unit purchase price of the USB flash drive will increase by 10%. Calculate the sales revenue Minitech Ltd must generate for 2016 to achieve profit $550,000, if the selling price and fixed cost remain unchanged.