ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.23 : An engineering company would like to produce 10000 units of control instruments. Let selling price per unit = $10, variable cost per unit = $2, overall fixed cost = $30000. (a) Calculate the income obtained when all units are sold out successfully. (b) Find the overall cost of production. (c) Calculate the percentage of gross profit obtained based on the answers in (a) and (b). (d) Find the minimum units that need to be sold out successfully in order to prevent losses. (e) How many minimum units of instruments that need to be produced in order to prevent losses, if all units produced are sold out successfully?
ACCOUNTING AND FINANCIAL ENGINEERING - ANSWER 34.23 : (a) Income = 10000 units x $10 / unit = $100000. (b) Overall cost of production = overall variable cost + overall fixed cost = 10000 units x $2 / unit + $30000 = $50000. (c) Percentage of gross profit = 100 x [ answer (a) - answer (b) ] / [ answer (a) ] = 100 x ($100000 - $50000) / ($100000) = 50 %. (d) Let N units x $10 / unit = $50000 = answer (b) where N = units successfully sold = $50000 / ($10 / unit) = 5000 units. (e) Let contribution margin = (selling price - variable cost) / unit = $ (10 - 2) = $8. M x (contribution margin) = overall fixed cost = $30000. M = ($30000) / ($8) = 3750 units need to be produced at minimum. The answer is given by Kang Chuen Tat; PO Box 6263, Dandenong, Victoria VIC 3175, Australia; SMS +61405421706; chuentat@hotmail.com; http://kangchuentat.wordpress.com.
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ACCOUNTING AND FINANCIAL ENGINEERING - EXAMPLE 34.28 : In the development of a small engineering facility for biochemical processing, completed contract method is applied in its construction accounting. In a short contract period, let the (contract price) = A. Let the (costs to date) = B; (estimated cost to complete) = C. (a) Find the values of : (i) estimated total costs; (ii) total estimated profit; (iii) percent completion to date. (b) If the project contract is 100 % completed : (i) find the total gross profit recognized; (ii) what is the exact numerical value of C?
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