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Math question very stuck

Western Ltd plans to assemble and sell 30,000 giant teddy bears in 2011 at £40 each. Western’s costs are as follows:

Variable costs:
Materials £14 per bear
Labour £8 per bear
Overheads £8 per bear

Estimated fixed costs for the year £ 120,000

You are required to calculate:

(i) Western’s Ltd planned contribution for 2011
(ii) Western’s Ltd planned profit for 2011
(iii) The break-even sales value for 2011
(iv) The break-even number of bears to be sold
(v) The margin of safety for 2011 in sales value
(vi) The margin of safety for 2011 in number of bears sold
Reply 1
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BabyMaths
Original post by melon89
Western Ltd plans to assemble and sell 30,000 giant teddy bears in 2011 at £40 each. Western’s costs are as follows:

Variable costs:
Materials £14 per bear
Labour £8 per bear
Overheads £8 per bear

Estimated fixed costs for the year £ 120,000

You are required to calculate:

(i) Western’s Ltd planned contribution for 2011
(ii) Western’s Ltd planned profit for 2011
(iii) The break-even sales value for 2011
(iv) The break-even number of bears to be sold
(v) The margin of safety for 2011 in sales value
(vi) The margin of safety for 2011 in number of bears sold


What does "contribution" mean in this context?

How do you define margin of safety?

Can you express the profit in terms of the number of bears made and sold, assuming all bears made are sold?
Reply 2
Avatar for melon89
melon89
OP
Contribution im pretty sure is meaning gross profit in this context.
Margin of Safety = Expected (or) Actual Sales Level - Breakeven sales Level
when you say express the profit in terms of the number of bears made and sold, this would be for the grand total if im thinking correctly ?
Reply 3
Avatar for melon89
melon89
OP
Im wondering if the first question is 36?
Original post by melon89
Western Ltd plans to assemble and sell 30,000 giant teddy bears in 2011 at £40 each. Western’s costs are as follows:

Variable costs:
Materials £14 per bear
Labour £8 per bear
Overheads £8 per bear

Estimated fixed costs for the year £ 120,000

You are required to calculate:

(i) Western’s Ltd planned contribution for 2011
(ii) Western’s Ltd planned profit for 2011
(iii) The break-even sales value for 2011
(iv) The break-even number of bears to be sold
(v) The margin of safety for 2011 in sales value
(vi) The margin of safety for 2011 in number of bears sold


Total cost per bear=£14 + £8 + £8 + £ 120000300000\frac{120000}{300000} =£34
so they have a profit of £6 per bear
Does this get you started?
(edited 9 years ago)
Reply 5
Avatar for melon89
melon89
OP
Cant say it does I still find this baffling, are you saying 34 is the answer to q1?
Reply 6
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melon89
OP
If someone could point me in the direction of the formulas that would be helpful..
Reply 7
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melon89
OP
So the planned profit 2011 would be 180,000 6x30,000 = 180,000 ?
Original post by melon89
So the planned profit 2011 would be 180,000 6x30,000 = 180,000 ?


Agreed.

For the "planned contribution", I'd think you'd want the total outlay by the company - unless there's some definition of "planned contribution" that I'm not aware of.
Reply 9
Avatar for melon89
melon89
OP
Im very lost now, so is the above correct ?
Reply 10
Avatar for lerjj
lerjj
13
Planned contribution is total expenditure isn't it?

So: 30 000 X (14+8+8) +120 000

Profit is income-expenditure

=30 000 X 40 - (Q1)

Does this get you started? Assuming you know all the definitions, this should be easy.
Reply 11
Avatar for melon89
melon89
OP
1020000

180000

??????????????????????
Original post by melon89
1020000

180000

??????????????????????


Yes.

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