Accounting Multiple Choice Question – 22 August 2023

The information relates to the production of 50,000 units of product A:

• selling price £25 per unit of A
• variable costs £15 per unit of A
• contribution £10 per unit of A

The fixed costs are £300,000.

The margin of safety is 20,000 units.

The unit selling price of A is increased by 10 %.

What is the percentage increase in the margin of safety?

Select ONE answer:

1. 13.6%
2. 20%
3. 24.2%
4. 30%

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – SP £25 *1.1 = £27.5 so CM now £12.5 per unit. BEP now £300k / £12.5 = 24,000 units, therefore margin of safety now 26, 000 units an increase of 30%

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