Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in. The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021. The company plans to sell each bottle of Kev-Power at Shs.198. The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
Kevian ltd Kenya soft drink manufacturer. The following information has been provided by the cost accountant of the company in relation to a new energy drink Kev-Power that the company is interested in investing in.
- The company plans to produce 80,000 bottles of Kev-Power and sell 80,000 bottles of Kev-Power during the first year 2021.
- The company plans to sell each bottle of Kev-Power at Shs.198.
- The Variable costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
|
Variable Costs Per Bottle Produced |
|
|
Direct Material Cost |
Shs 6 per Bottle |
|
Direct Labour Cost |
Shs 3 per Bottle |
|
Variable Production overhead cost |
Shs 3.8 per Bottle |
|
Variable Administration overhead cost |
Shs 2.5 per Bottle |
|
Variable Selling & Distribution overhead cost |
Shs 1.5 per Bottle |
|
|
|
4.The Fixed costs for the year in relation to production and sale of the 80,000 bottles of Kev-Power is as provided in the table below.
|
Fixed Cost Total for the entire Year 2021: |
|
|
Fixed Production overhead cost |
4,100,000 |
|
Fixed Administration overhead cost |
3,900,000 |
|
Fixed Selling & Distribution overhead cost |
350,000 |
|
Rent Cost |
300,000 |
|
|
|
Required:
- Calculate the break-even both in units and sales value using the contribution margin method for Kev-Power for the year 2021
- Calculate the number of Units (Kev-Power bottles) that the Kevian ltd will have to produce and sell to earn a target profit of Shs 45,000,000.
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