CAT INTRODUCTORY LEVEL

PAPER 2

INFORMATION FOR MANAGEMENT CONTROL

COURSE EXAMINATION 2

QUESTION PAPER

INSTRUCTIONS: Please attempt this exam under test conditions and attach the front sheet
complete with your name and address to your script. The completed package
should be sent to BPP for marking.

Take a few moments to review the notes on the inside of this page titled, ‘Get into
good exam habits now!’ before attempting the exam.

ALL QUESTIONS SHOULD BE ATTEMPTED

TIME ALLOWED 2 HOURS

CT02CE10
Get into good exam habits now!
Take a moment to focus on the right approach for this exam.

Effective time management

• Watch the clock, leave space and move on if you get behind.
• Take a few moments to think what the requirements are asking for and how you are going to answer
them.

Effective planning
• Be selective: focus on the difficult requirements
• Read the requirements carefully: focus on mark allocation, question words (see below) and potential
overlap between requirements.
• Identify and make sure you pick up the easy marks available in each question.

Effective layout
• Present your numerical solutions using the standard layouts you have seen. Show and reference
your workings clearly.
• With written elements try and make a number of distinct points using headings and short
paragraphs. You should aim to make a separate point for each mark.
• Ensure that you explain the points you are making ie why is the point a strength, criticism or
opportunity?
• Give yourself plenty of space to add extra lines as necessary, it will also make it easier for the
examiner to mark.

Common terminology
Advise To counsel, inform or notify
Calculate/compute To ascertain or reckon mathematically
Compare and contrast Show the similarities and/or differences
Define Give the exact meaning of
Describe Communicate the key features of
Discuss To examine in detail by argument
Distinguish Highlight the differences between
Evaluate To appraise or assess the value of
Explain Make clear or intelligible/state the meaning of
Identify Recognise, establish or select after consideration
Illustrate Use an example to explain something
Interpret Process information to explain its meaning
Justify To produce reasons in support of
List State short pieces of information on separate lines
Recommend To advise on a course of action
Summarise/outline To express the most important facts of

2
Answer all questions - Use the answer sheet at the end of this exam to record your answers

1 The term 'peripherals' refers to:

A Input and output devices

B External storage devices

C Output devices

D Input, output and external storage devices

2 Which of the following is not considered an advantage of e-mail?

A Secure method of communication

B Speedy delivery

C Stores messages for a given period after they are received

D Can make a single message available to many persons

3 Which of the following is not hardware?

A Printer

B CPU

C Microsoft Word for Windows

D Keyboard

4 Input, output and storage devices are often referred to as peripherals. Which of the following is
not a peripheral?

A Modem

B Mouse

C Scanner

D Windows XP

3
5 Computers can be described by type. What type of computer would you usually find on a desk
in an office?

A Mainframe

B PC

C Supercomputer

D Palmtop

6 A PC has three major components. Which of the following is not a PC component?

A Input devices

B CPU

C VDU

D Printer

7 Computer data is frequently stored on disk. Which of the following would you expect to have
the greatest storage capacity?

A CD ROM

B Floppy disk

C Hard disk

D DVD ROM

8 Data can be stored on a variety of mediums. Which of the following is not a storage medium?

A Mouse

B CD-ROM

C Magnetic tape

D Zip disk

4
9 Which of the following statements is incorrect? A Local Area Network (LAN)

A Relies on telephone lines to link it together

B May consist of a number of independent computers linked together

C Is usually based in a limited geographical area

D Is likely to contain a central server computer

10 Which of the following is not a typical function of an operating system?

A Booting

B Translating a program from one language to another

C Managing multi-tasking

D File management

11 A cost centre is:

A A unit of product or service in relation to which costs are ascertained

B An amount of expenditure attributable to an activity

C A production or service location, function, activity or item of equipment for which costs are
accumulated

D A centre for which an individual budget is drawn up

12 Which of the following techniques would be useful for controlling costs?

(i) variance analysis
(ii) comparing actual results with a flexed budget
(iii) analysis of the trend in cost

A (i) and (ii)

B (i) and (iii)

C (ii) and (iii)

D (i), (ii) and (iii)

5
13 Blur plc sells a single product called Smudge. In the next month, it is budgeted that Smudge will
generate a total revenue of $600,000, with a contribution of $250,000. Fixed costs are budgeted
at $200,000 for next month.
What is the margin of safety?

A 5%

B 10%

C 15%

D 20%

14 Which one of the following statements is true?

A The total variable cost varies with a measure of activity.

B A variable cost is an unavoidable cost.

C A variable cost is not relevant for decision making.

D A variable cost becomes fixed in the long run.

15 XX Ltd absorbs overheads based on units produced. In one period, 23,000 units were produced,
actual overheads were $276,000 and there was $46,000 under absorption of overheads.
The budgeted overhead absorption rate per unit was:

A $10

B $12

C $13

D $14

16 An overhead absorption rate is used to:

A allocate overhead costs to cost centres.

B attribute overheads to products.

C spread indirect costs across a number of cost centres.

D control overheads.

6
17 B Ltd produces and sells a single product, which has a profit/volume ratio of 30%. Fixed costs
amount to $120,000 each year.
The sales revenue required each year to break even

A is $156,000

B is $171,428

C is $400,000

D cannot be calculated from the data supplied.

18 Which of the following are indirect expenses?

I The cost of overtime worked specifically to complete a one-off project
II The depreciation of a machine on an assembly line
III Primary packing materials eg cartons and boxes
IV The hire of maintenance tools or equipment for a factory

A I and IV

B II and IV

C I and III

D IV only

19 For a particular cost, the total expenditure depends on volume of output and can be shown
graphically as follows.

$
Cost

Volume of output (units)

7
 The cost shown on the graph is a:

A Fixed cost

B Variable cost

C Semi-variable cost

D Step cost

20 If an assembly line supervisor is paid a salary of $100 each week, and an extra 10c for every unit
of production made in the week, this wage cost could be described as:

A A semi-variable cost

B A fixed cost

C A variable cost

D A step cost

21 Which of the following are indirect expenses?

(i) The depreciation of a machine on an assembly line

(ii) The hire cost of maintenance tools or equipment for a factory
(iii) The cost of overtime worked specifically to complete a one off project at the customer's
request
(iv) Primary packaging materials (eg cartons and boxes)

A (i) only

B (i) and (ii)

C (i), (ii) and (iii)

D (i), (ii), (iii) and (iv)

8
22 A TV production company makes a range of soaps, reality TV programmes and nature
documentaries. It sells these to TV networks and is trying to establish which programmes are the
most profitable. What report could the company use to find this information?

A A report showing revenue per programme

B A report showing viewing figures and advertising revenue per programme

C A report showing contribution per programme

D A report showing the number of TV networks who have bought each programme

23 Which of the following departments is a production cost centre in a manufacturing company?

A Assembly

B Stores

C Canteen

D Maintenance

24 A company divides its activities into profit centres. The manager of the profit centre for a region
would most likely be interested in which of the following reports?

(i) Units sold and revenue earned by product

(ii) An evaluation of returns earned on recent capital expenditure
(iii) Actual cost comparison to budget costs for the month
(iv) Market research report showing customers opinions on the company's key product
compared to their opinions on a competitor's rival product

A (iii) only

B (i) and (iii)

C (i), (iii) and (iv)

D (i), (ii), (iii) and (iv)

9
25 SBK plc sells pharmaceutical drugs around the world. It sells a wide range of drugs, including
oncology drugs, anti-depressants and anti-bacterial drugs. An extract from SBK plc's coding list
shows the following:
110 Sales to US
120 Sales to Europe
130 Sales to Rest of the World
001 Sales of oncology drugs
002 Sales of anti-depressant drugs

Each sale is coded by combining two sub codes – for example the sale of oncology drugs to a US
hospital would be coded 110-001. What code would be given to an invoice for the sale of anti-
depressants to a hospital in Norway?

A 001-120

B 120-003

C 120-001

D 120-002

26 Which of the following departments is least likely to receive a copy of a goods received note
(GRN) when it arrives?
A Accounts

B Stores

C Sales

D Purchasing

27 Which of the following statements relating to coding is incorrect?

A Coding enables companies to record and retrieve information quickly and easily

B Coding ensures that no errors are ever made

C Coding enables companies to file large amounts of information in a small space

D Information which has been coded can be sorted in a variety of different ways

10
28 Zero Ltd has recently been very busy in their production department. They have 10 direct
employees and 15 indirect employees in the department. All employees earn $7.50 per hour with
overtime paid at time and a half.
Normal working hours are 37 hours per week, but last week direct employees worked 45 hours
each (3 hours of overtime for a specific customer order and 5 hours for general production
requirements)
Indirect workers each worked 41 hours all for general production requirements.
What labour cost would be charged to production overheads for the week?

A $4,837.50

B $5,137.50

C $525

D $5,025

29 Which would be the most appropriate basis for apportioning heating cost for a factory?

A Number of employees

B Cubic space (m3)

C Machine hours

D Floor area (m2)

30 Which of the following is not a piece of documentation used in the material ordering process?

A Purchase requisition

B Purchase order

C Materials returned note

D Goods received note

31 Which of the following is not a step in absorption costing?

A Allocation

B Addition

C Apportionment

D Absorption

11
32 During March 20X2 the following amounts were paid in relation to a company's employees:

$
Income tax (PAYE) 13,750
Employee's National Insurance contributions 5,500
Employer's National Insurance contributions 6,100
Cash (net pay) 35,750

What is the gross pay for March 20X2?

A $49,500

B $55,000

C $61,100

D $35,750

33 An inventory resulting in customer orders not being satisfied is most likely to occur in which of
the following situations?

(i) Inventory levels become too high

(ii) The supplier cannot deliver the goods on time
(iii) Unusually high customer demand is experienced

A (i) only

B (iii) only

C (ii) and (iii)

D (i), (ii) and (iii)

34 John Birch gets paid on a piecework basis, based on the following number of units produced.

1st 50 units produced $0.50 per unit

Between 50 – 100 units produced $0.75 per unit
Between 100 – 150 units produced $1.00 per unit
> 150 units produced $1.25 units
Only the additional units qualify for the higher rates.
How much did John Birch earn on a day where he made 140 units?

A $102.50

B $140.00

C $115.00

D $175.00

12
35 Product X has a budgeted direct labour cost of $7 per unit. The budgeted direct labour costs for
the year are $39,200 (based on budgeted units of 5,600). However, during the period actual
production of the product was 5,750 units and direct labour costs of $43,200 were incurred.
What was the direct labour variance?
A $4,000 Adverse

B $2,950 Adverse

C $4,000 Favourable

D $2,950 Favourable

36 Which of the following would help to explain an adverse direct material variance?

(i) An increase in material wastage in production

(ii) An increase in suppliers' prices
(iii) Less material being required per unit of production than budgeted

A (i) only

B (ii) only

C (ii) and (iii)

D (i) and (ii)

37 A company has the following results and reports all variances greater than 5% of budget.

Budget Actual
Materials 5,000 5,260
Labour 7,000 7,300
Overheads 3,000 2,810

Which variances would be included in the company's exception report?

A Materials only

B Materials and overheads

C All three variances

D None of the above

13
38 Which one of the following is NOT a factor that should affect the decision of whether to
investigate a variance or not?

A Cost of investigation

B Personnel involved

C Trend of variance

D Whether the cost can be influenced by management's decisions and actions

39 Peters and Sons Ltd has just completed the preparation of their management accounts for March
20X4. Which of the following sets of data could they use as a comparison to the actual results for
March 20X4?

(i) March 20X3

(ii) February 20X4
(iii) Budgeted results for March 20X4
(iv) Year to March 20X3

A (ii) and (iii)

B (i) and (iii)

C (i), (ii) and (iii)

D All of the above

40 Adams Ltd sells magazines at $2.50 each. During 20X4 Adams Ltd sold 325,000 magazines. The
cost of each magazine is as follows:

$
Materials – paper 0.30
Labour 0.60
Expenses – ink and bindings 0.10
Overheads 0.25
Total cost per magazine 1.25

Adams Ltd's total contribution for 20X4 is:

A $406,250

B $487,500

C $520,000

D $715,000

14
41 If a company's production is limited by the availability of the material it uses (measured in kgs),
making which of the following products would maximise the company's profits.

A The product that has the highest contribution per kg of material used

B The product that has the highest contribution per unit

C The product that has the highest profit per unit

D The product that has the highest profit per kg of material used

42 Company X has the following information:

Sales $99,600
Variable costs $57,800
Fixed costs $25,650

What is the contribution to sales ratio for company X?

A 58%

B 16%

C 26%

D 42%

43 Which of the following is a limitation of marginal costing?

A Arbitrary apportionment of overheads to products required

B It may not be clear whether a product is profitable or not if fixed costs are not shared
among products

C Decisions can't be made unless all product costs are considered

D It is complex to use

15
44 Powell & Co make washing machines. In 20X4 they budgeted to make and sell 3,000 machines
for $275 each.

Each washing machine incurs variable costs of $120 and fixed costs of $95.

What is Powell & Co's margin of safety for 20X4?

A 1,839 units

B 1,161 units

C 4,750 units

D 1,417 units

45 Which of the following are indirect expenses?

I The cost of overtime worked specifically to complete a one-off project

II The depreciation of a machine on an assembly line
III Primary packing materials eg cartons and boxes
IV The hire of maintenance tools or equipment for a factory

A I and IV

B II and IV

C II and IV

D IV only

The following data relates to questions 46 and 47

Data concerning K Limited's single product is as follows.

$ per unit
Selling price 6.00
Variable production cost 1.20
Variable selling cost 0.40
Fixed production cost 4.00
Fixed selling cost 0.80

Budgeted production and sales for the year are 10,000 units.

16
46 What is the company's breakeven point, to the nearest whole unit?

A 8,000 units

B 8,333 units

C 10,000 units

D 10,909 units

47 It is now expected that the variable production cost per unit and the selling price per unit will each
increase by 10%, and fixed production costs will rise by 25%.
What will be the new breakeven point, to the nearest whole unit?

A 8,788 units

B 11,600 units

C 11,885 units

D 12,397 units

48 E Limited manufactures a single product, P. Data for the product are as follows.

$ per unit
Selling price 20
Direct material cost 4
Direct labour cost 3
Variable production overhead cost 2
Variable selling overhead cost 1
Fixed overhead cost 5
Profit per unit 5
The profit/volume ratio for product P is:

A 25%

B 50%

C 55%

D 60%

17
49 A company's breakeven point is 6,000 units per annum. The selling price is $90 per unit and the
variable cost is $40 per unit. What are the company's annual fixed costs?

A $120,000

B $240,000

C $300,000

D $540,000

50 Z plc makes a single product which it sells for $16 per unit. Fixed costs are $76,800 per month
and the product has a profit/volume ratio of 40%. In a period when actual sales were $224,000, Z
plc's margin of safety, in units, was:

A 2,000

B 12,000

C 14,000

D 32,000

18
INFORMATION FOR MANAGEMENT CONTROL – COURSE EXAM 2

ANSWER SHEET

Question Options (circle one option only)

1 A B C D

2 A B C D

3 A B C D

4 A B C D

5 A B C D

6 A B C D

7 A B C D

8 A B C D

9 A B C D

10 A B C D

11 A B C D

12 A B C D

13 A B C D

14 A B C D

19
15 A B C D

16 A B C D

17 A B C D

18 A B C D

19 A B C D

20 A B C D

21 A B C D

22 A B C D

23 A B C D

24 A B C D

25 A B C D

26 A B C D

27 A B C D

28 A B C D

29 A B C D

30 A B C D

20
31 A B C D

32 A B C D

33 A B C D

34 A B C D

35 A B C D

36 A B C D

37 A B C D

38 A B C D

39 A B C D

40 A B C D

41 A B C D

42 A B C D

43 A B C D

44 A B C D

45 A B C D

21
46 A B C D

47 A B C D

48 A B C D

49 A B C D

50 A B C D

22
Student self-assessment
Having completed this paper take a few minutes to consider what you did well and what you found difficult. Use
this as a basis to focus your future study on effectively improving your performance.

Common problems Future emphasis if you answer Yes

Timing and planning

Did you finish too early? Y/N Focus your planning time on generating more ideas.
Use models to help develop width to your thinking.
Did you overrun? Y/N Focus on allocating your time better.
Practise questions under strict timed conditions.
If you get behind leave space and move on.
Did you waffle? Y/N Focus your planning time on developing a logical structure to
your answer.

Layout
Was your answer difficult to follow? Y/N Use headings and subheadings.
Use numbering sequences when identifying points.
Leave space between each point.
Did you fail to explain each point clearly? Y/N Show why the point identified answers the question set.
Did you fail to show any workings or were
your workings unclear? Y/N Give yourself time and space to make the markers job easy.

Content
Did you struggle with:
Interpreting the questions? Y/N Learn the meaning of question words (inside front cover).
Learn subject jargon (study text glossary).
Read questions carefully noting all the parts.
Practise as many questions as possible.
Understanding the subject? Y/N Review your notes/text.
Work through easier examples first.
Contact ACCA queries for help.
Remembering the notes/text? Y/N Quiz yourself constantly as you study. You need to develop your
memory as well as your understanding of a subject.

23
24
®
BPP House, Aldine Place, London W12 8AA
Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia
 CAT INTRODUCTORY LEVEL

PAPER 2

INFORMATION FOR MANAGEMENT CONTROL

COURSE EXAMINATION 2

SUGGESTED SOLUTIONS, MARKING SCHEME

AND COMMENTARY

CT02CE10 (2)
 CAT INTRODUCTORY LEVEL

PAPER 2

INFORMATION FOR MANAGEMENT CONTROL

COURSE EXAMINATION 2

COMMENTARY

The questions in this Mock Exam are of exam standard. As this exam covers the whole syllabus, you should
find it provides a good indication of whether you are ready for the real exam.

Marking scheme

2 marks for each correct answer Total marks 100

2
1 D Peripherals are pieces of IT hardware other than computers. This term includes input,
output, external storage and communication devices.

2 A Most electronic mail is sent via the Internet. However, there are security issues with the
use of public systems which lead some organisations to investment in private e-mail
services.

3 C Microsoft Word for Windows is wordprocessing software.+

4 D Windows XP is software – an operating system.

5 B PCs are now widespread throughout organisations.

6 D A printer is not a PC component (it's a peripheral). Input devices (such as a keyboard) the
screen and the CPU are PC components.

7 C Hard disks vary in size, but a typical new PC hard disk offers 50 Gb – 100 Gb of storage
capacity. A DVD-ROM can hold approximately 5 Gb, a CD-ROM 650 Mb and a floppy
disk 1.44 Mb.

8 A The mouse is an input device and displays data. Data can be stored on CD-ROM disks, on
magnetic tapes, and on ZIP disks.

9 A A LAN is linked by direct cables not by the telecommunications network. (A WAN is

linked by the telecommunications network..)

10 B The operating system controls the operation of the computer.

11 C Option A is the definition of a cost unit. Option B describes the cost of an activity or cost
centre. Option D describes a budget centre. Although a budget centre may also be a cost
centre at times, this is not always the case.

12 D All of the techniques would be useful.

250,000
13 D P/V ratio = = 0.416666
600,000
$200,000
Breakeven revenue = = $480,000
0.416666
$600,000 _ $480,000
Margin of safety = × 100% = 20%
$600,000

3
14 A

15 A If actual overheads of $276,000 were under absorbed by $46,000, then absorbed

overheads were $230,000 ($276,000 – $46,000).
If overheads of $230,000 were absorbed by 23,000 units, then the overhead absorption rate
was:
$230,000
= $10 per unit
23,000 units

16 B An overhead absorption rate is used to attribute overheads to products.

Fixed costs $120,000

17 C Breakeven point (sales revenue) = = = $400,000
P/V ratio 0.3

18 B I is classed as direct labour.

III is classed as direct materials.

19 B The graph shows a variable cost

20 A As the salary contains both a fixed element (the basic wage) and a variable element (the
10c paid per unit) the wage expense is a semi-variable or mixed cost.

21 B These are both indirect expenses, because the costs can not be traced directly to the
products made using them.

22 C This report will show the contribution each programme makes towards the fixed costs
incurred to make all programmes. The programmes with the highest contribution will add
the most to the company's overall profit.

23 A Assembling the products will form part of the production process. All of the other
departments support production but do not contribute to the actual making of the unit.

24 C The manager of the profit centre is responsible for the centre's sales revenues and costs.
Therefore the manager will be interested in all reports providing information on actual and
potential sales and costs.

25 D 120-002 - Sale of anti-depressants in Europe

4
26 C Accounts will receive a copy to agree to the invoice prior to payment. Stores will have a
copy to record the goods received. Purchasing will receive a copy as confirmation that the
goods ordered have been received.

27 B Errors can occur in the code allocated to the cost/income, or in the input of the coded
information into the systems.

28 D
Direct workers indirect wages: $
Overtime for general production requirements
5 hrs × $7.50 × 50% × 10 employees 187.50

Indirect workers indirect wages:

Basic wage 41 hrs × $7.50 × 15 employees 4,612.50
Overtime (41 – 39) hrs × $7.50 × 50% × 15 employees 225.00
Total indirect wages 5,025.00
Overtime worked at the specific request of the customer and direct employees basic wages
are direct costs.

29 B Although floor space is frequently used for apportioning heating costs, if information on
cubic space is available this is more appropriate. The heating of a room will depend not
only on its floor space area but also its ceiling height.

30 C This is used when material has been issued to production and returned to stores (surplus to
production requirements).

31 B Addition isn't a step in absorption costing.

32 B
$
Gross pay

Income tax (PAYE) 13,750

Employee's National Insurance Contributions 5,500
Cash (net pay) 35,750
Gross pay 55,000
Employer's National Insurance Contributions are part of the total wages and salaries
cost to the employer, but not part of the employee's gross pay.

33 C Stock outs occur when the company has insufficient stock to meet customer orders, which
will occur in situation (ii) and (iii).

5
34 A
$
For units 1-50 50 × $0.50 25.00
For units 51-100 50 × $0.75 37.50
For units 101-140 40 × $1.00 40.00
Pay 102.50

35 B
$
Labour cost should have been $7 × 5,750 40,250
(budget rate × actual hours)
Actual labour cost 43,200
Labour variance 2,950 Adverse

36 D Using less material per unit of production than budgeted would mean lower material costs
actually incurred than budgeted, a favourable variance. An increase in wastage (and
therefore an increase in material used) or an increase in supplier's prices would both result
in higher actual material costs than budget, an adverse variance.

37 B
Budget Actual Variance Variance as % of
budget
Materials 5,000 5,260 260 5.2%
Labour 7,000 7,300 300 4.3%
Overheads 3,000 2,810 190 6.3%

38 B Variances should only be investigated if the benefit of the investigation will exceed the
cost, and the cost can be influenced and controlled by management once the reason for
the variance has been established.
A trend in a variance could be indicative of an underlying problem and would need to be
investigated.

39 C The results for the month of March 20X4 could not usefully be compared with the year
to March 20X3.

6
40 B
$
Selling price 2.50
Less: variable costs
Materials – paper (0.30)
Labour (0.60)
Expenses – ink and bindings (0.10)

Contribution per unit 1.50

Number of units 325,000
Contribution 487,500
Ink and binding expenses will vary/increase with each additional magazine
produced.

41 A Limiting factor analysis. By making the product with the highest contribution per kg of
material used you'll maximise the contribution (and therefore the profit) of the company
given the limited material available.

42 D Contribution to sales ratio

Contribution
= × 100%
sales

99,600 − 57,800
= × 100%
99,600

= 42%

43 B Arbitrary allocation of overheads to products and complexity are limitations of

absorption costing. Decisions should be made based on marginal costing.

Fixed costs
44 B Breakeven point =
contribution per unit

$95 × 3,000
=
$275 − $120
285,000
=
155
= 1,839 units
Margin of safety = budgeted sales – breakeven point
= 3,000 – 1,839
= 1,161 units

7
45 B I is a direct labour cost
III is direct materials

Fixed costs
46 D Breakeven point =
Contributi on per unit

10,000 × ($4.00 + 0.80) $48,000

= = = 10,909 units
($6.00 − ($1.20 + $0.40) £4.40

47 C
$ per unit
New selling price ($6 × 1.1) 6.60
New variable cost ($1.20 × 1.1) + $0.40 1.72
Revised contribution per unit 4.88
New fixed costs ($40,000 × 1.25) + $8,000 = $58,000
$58,000
Revised breakeven point = = 11,885 units
$4.88

Contributi on per unit

48 B P/V ratio =
Selling price per unit

$(20 _ 4 _ 3 _2 _1)
= × 100% = 50%
$20

49 C Contribution per unit = $90 – $40 = $50. The sale of 6,000 units just covers the annual
fixed costs, therefore the fixed costs must be $50 × 6,000 = $300,000.

Fixed costs $76,800

50 A Breakeven point = = = $192,000
P/V ratio 0.40

Actual sales = $224,000

Margin of safety in terms of sales value $32,000
÷ selling price per unit ÷ $16

Margin of safety in units 2,000

®
BPP House, Aldine Place, London W12 8AA
Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia
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