Question

Gkj ltd manufactures and sells a single product. The budgeted monthly information for the next year is as follows: sales per month 70,000 units, selling price per unit R5, variable costs per unit R2, fixed costs per month R150,000, initial investment R2,000,000. Calculate the budgeted profit for the year by using cost-volume-profit principles.

Answer 1

The budgeted profit for Gkj Ltd for the year, calculated using cost-volume-profit principles, is R720,000.

Step-by-step explanation:

To calculate the budgeted profit for the year using cost-volume-profit principles, we first need to calculate the total revenue, total variable costs, and total fixed costs on a monthly basis and then multiply those figures by 12 to get the annual amounts.

Here's the monthly calculation:

• Total Revenue = Selling Price per Unit × Sales per Month = R5 × 70,000 = R350,000
• Total Variable Costs = Variable Cost per Unit × Sales per Month = R2 × 70,000 = R140,000
• Total Fixed Costs = R150,000
• Monthly Profit = Total Revenue - Total Variable Costs - Total Fixed Costs = R350,000 - R140,000 - R150,000 = R60,000

Now for the annual calculation:

• Annual Profit = Monthly Profit × 12 = R60,000 × 12 = R720,000

Therefore, the budgeted profit for the year is R720,000.