Summary Unit 7 - Management Accounting - P2 M1 D1

Conor Cunningham P2 M1 D1


Management Accounting – Task 2

A)

Level of Sales Fixed costs Variable Total costs Profit/Loss
production revenue (£) (£) costs (£) (£) (£)
(units)
0 0 113,760 0 113,760 -113,760
250,000 62,500 113,760 18,540 132,300 -69,800
500,000 125,000 113,760 37,080 150,840 -25,840
750,000 187,500 113,760 55,620 169,380 18,120
1,000,000 250,000 113,760 74,160 187,920 62,080
1,250,000 312,500 113,760 92,700 206,460 106,040
1,500,000 375,000 113,760 111,240 225,000 150,000


(Please find annotated graph and I-IV on paper attached)



B)

To; Management Team of Sophie’s Spring Water

From; Conor Cunningham

Date; 9th March 2017

Reducing the selling price of the product may allow Sophie’s Spring Water to increase their
sale while still maintaining their profit of £100,000. Below will look at the effects of a new
selling price.

Absorption costing = FC + VC

= £113,760 + £111,240

= £225,000

Number of units = 1,500,000

Cost per unit = 225,000/1,500,000

= 15p per bottle

Mark-up = 50%

Selling price = 15p x50%

15p + (15 x 50%)