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CASE 3 - C ASE 3 COST-P RO F IT-VOL U M E ANALYS IS Cyprus...

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CASE 3: COST-PROFIT-VOLUME ANALYSIS Cyprus Fuel Project manufactures and sells a single product, EcoPlus, a fuel saving device for motor vehicles in the domestic market. The Project commenced business operations on January 2010 and sales in the first six months were brisk due to the world wide increase in fuel prices. However the second half the year saw a drop in sales as a result of more competing companies entering the market and a gradual reduction in fuel prices. The following summarised profit and loss account has been prepared by the previous management accountant: YEAR 2010 1 st half year 2 nd half year £000 £000 £000 £000 Sales - 1 st half: 35,000 units 1,400 - 2 nd half: 25,000 units 1,000 Direct materials 350 250 Direct labour 280 200 Manufacturing overheads 245 195 Administration overheads 15 15 Selling overheads * 165 1,055 145 805 Net profit 345 195 * Selling overheads include sales commission of 5% based on sales value. The Project Manager (PM), an engineer who founded the Project, recently attended a seminar at UEL for non-accountants on ‘Cost-Volume-Profit Analysis and its benefits’ . Although he found the seminar interesting, he would like to know more about the following: (a)
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