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    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
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    (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?
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    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 ?
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    Im wondering if the first question is 36?
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    (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 + £ \frac{120000}{300000} =£34
    so they have a profit of £6 per bear
    Does this get you started?
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    Cant say it does I still find this baffling, are you saying 34 is the answer to q1?
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    If someone could point me in the direction of the formulas that would be helpful..
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    So the planned profit 2011 would be 180,000 6x30,000 = 180,000 ?
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    (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.
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    Im very lost now, so is the above correct ?
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    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.
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    1020000

    180000

    ??????????????????????
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    (Original post by melon89)
    1020000

    180000

    ??????????????????????
    Yes.
 
 
 
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