QUESTION TWO a) Okapi enterprises sell two products

QUESTION TWO

a) Okapi enterprises sell two products. Model A100 and model B900. Monthly sales and the

contribution margin ratios for the two products follow:

Product

Model A100 Model B900 Total

Sales (in sh.) 700,000 300,000 1,000,000

Contribution margin

Ratio 60% 70%

The company fixed expenses total Sh.598, 500 per month.

Required:

i. Prepare an income statement for the company as a whole. (6 Marks)

ii. Compute the break-even point for the company and for each product (10 marks)

b) Super sales company is the exclusive distributor for a revolutionary book bag. The product sells for

Sh.60 per unit and has a contribution margin ratio of 40%. The company's fixed expenses are

Sh.360, 000 per year.

Required:

i. Compute the variable expenses per unit? (2 marks)

ii. Compute the break-even point? (4 marks)

iii. What sales level in units and in shillings is required to earn an annual profit of

Sh.90,000? (3 marks)