Expected sales 2,000 units of le 25, variable cost/unit, le15, fixed costs to 10,000. i) prepare a budgeted income statement. ii) what is the break-even sales value? iii) Calculate the margin of safety. iv) Explain the importance of budgeting in planning.

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Asked on June 23, 2026Business/Management

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Accepted Answer · 2026-06-23T22:46:16.048Z

Here's the solution to question b): b) Given data: Expected Sales = 2,000 units Selling price per unit = Le 25 Variable Cost per unit = Le 15 Fixed Costs = Le 10,000 i) Prepare a budgeted income statement. Step 1: Calculate Total Sales Revenue. Total Sales Revenue = Expected Sales (units) × Selling price per unit Total Sales Revenue = 2,000 units × Le 25/unit Total Sales Revenue = Le 50,000 Step 2: Calculate Total Variable Costs. Total Variable Costs = Expected Sales (units) × Variable Cost per unit Total Variable Costs = 2,000 units × Le 15/unit Total Variable Costs = Le 30,000 Step 3: Prepare the Budgeted Income Statement. Budgeted Income Statement Sales Revenue && Le 50,000 \\ Less: Variable Costs && (Le 30,000) \\ Contribution Margin && Le 20,000 \\ Less: Fixed Costs && (Le 10,000) \\ Net Profit && Le 10,000 ii) Calculate the break-even sales value. Step 1: Calculate Contribution per unit. Contribution per unit = Selling price per unit - Variable Cost per unit Contribution per unit = Le 25 - Le 15 Contribution per unit = Le 10 Step 2: Calculate Break-even point in units. Break-even point (units) = Fixed CostsContribution per unit Break-even point (units) = Le 10,000Le 10/unit Break-even point (units) = 1,000 units Step 3: Calculate Break-even sales value. Break-even sales value = Break-even point (units) × Selling price per unit Break-even sales value = 1,000 units × Le 25/unit Break-even sales value = Le 25,000 iii) Calculate the margin of safety. Step 1: Calculate Actual Sales Value. Actual Sales Value = Expected Sales (units) × Selling price per unit Actual Sales Value = 2,000 units × Le 25/unit Actual Sales Value = Le 50,000 Step 2: Calculate Margin of Safety in value. Margin of Safety (value) = Actual Sales Value - Break-even Sales Value Margin of Safety (value) = Le 50,000 - Le 25,000 Margin of Safety (value) = Le 25,000 iv) Explain the importance of budgeting in planning. Budgeting is crucial in planning because it provides a financial roadmap for an organization, translating strategic goals into specific, measurable financial targets. It helps in resource allocation, ensuring that funds are directed towards achieving objectives efficiently, and serves as a control mechanism to monitor performance against planned activities. What's next?

Accepted Answer · 2026-06-23T22:46:16.048Z

Here's the solution to question b): b) Given data: Expected Sales = 2,000 units Selling price per unit = Le 25 Variable Cost per unit = Le 15 Fixed Costs = Le 10,000 i) Prepare a budgeted income statement. Step 1: Calculate Total Sales Revenue. Total Sales Revenue = Expected Sales (units) × Selling price per unit Total Sales Revenue = 2,000 units × Le 25/unit Total Sales Revenue = Le 50,000 Step 2: Calculate Total Variable Costs. Total Variable Costs = Expected Sales (units) × Variable Cost per unit Total Variable Costs = 2,000 units × Le 15/unit Total Variable Costs = Le 30,000 Step 3: Prepare the Budgeted Income Statement. Budgeted Income Statement Sales Revenue && Le 50,000 \\ Less: Variable Costs && (Le 30,000) \\ Contribution Margin && Le 20,000 \\ Less: Fixed Costs && (Le 10,000) \\ Net Profit && Le 10,000 ii) Calculate the break-even sales value. Step 1: Calculate Contribution per unit. Contribution per unit = Selling price per unit - Variable Cost per unit Contribution per unit = Le 25 - Le 15 Contribution per unit = Le 10 Step 2: Calculate Break-even point in units. Break-even point (units) = Fixed CostsContribution per unit Break-even point (units) = Le 10,000Le 10/unit Break-even point (units) = 1,000 units Step 3: Calculate Break-even sales value. Break-even sales value = Break-even point (units) × Selling price per unit Break-even sales value = 1,000 units × Le 25/unit Break-even sales value = Le 25,000 iii) Calculate the margin of safety. Step 1: Calculate Actual Sales Value. Actual Sales Value = Expected Sales (units) × Selling price per unit Actual Sales Value = 2,000 units × Le 25/unit Actual Sales Value = Le 50,000 Step 2: Calculate Margin of Safety in value. Margin of Safety (value) = Actual Sales Value - Break-even Sales Value Margin of Safety (value) = Le 50,000 - Le 25,000 Margin of Safety (value) = Le 25,000 iv) Explain the importance of budgeting in planning. Budgeting is crucial in planning because it provides a financial roadmap for an organization, translating strategic goals into specific, measurable financial targets. It helps in resource allocation, ensuring that funds are directed towards achieving objectives efficiently, and serves as a control mechanism to monitor performance against planned activities. What's next?

Expected sales 2,000 units of le 25, variable cost/unit, le15, fixed costs to 10,000. i) prepare a budgeted income statement. ii) what is the break-even sales value? iii) Calculate the margin of safety. iv) Explain the importance of budgeting in planning.

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Expected sales 2,000 units of le 25, variable cost/unit, le15, fixed costs to 10,000. i) prepare a budgeted income statement. ii) what is the break-even sales value? iii) Calculate the margin of safety. iv) Explain the importance of budgeting in planning.

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