Question 3

K Plc. manufactures one standard product, which sells at £10.

You are required to:
a) prepare from the data given below, a break-even and profit–volume graph showing the results for the six months ending 30 April
and to determine:
i. the fixed costs
ii. the variable cost per unit
iii. the profit–volume ratio
iv. the break-even point
v. the margin of safety

Sales Profit/(Loss)
Month (units) (£)
November 30 000 40 000
December 35 000 60 000
January 15 000 (20 000)
February 24 000 16 000
March 26 000 24 000
April 18 000 (8 000)

b) discuss the limitations of such a graph;

c) explain the use of the relevant range in such

CIMA Cost Accounting 2 Adapted