Mr Gallagher is commencing in business to produce a single article which it sells at €/£100. He estimates that the marginal cost of production is €/£60, while his fixed costs will be €/£4,000 per month. He has asked for your assistance with some calculations to inform his business plan.
Requirement
(a) Calculate the projected profit/(loss) for the month for sales of:
– 500 units; – 200 units and – 50 units. 3 Marks (b) Calculate the Sales Revenue required to earn a projected profit of €/£5,000. 3 Marks (c) Calculate the projected profits at sales of €/£30,000. 3 Marks (d) Calculate the margin of safety in value terms and units for sales of 400 units. 3 Marks (e) Calculate a projected breakeven point if the sales price is reduced by 10%. 3 Marks (f) Discuss the advantages and disadvantages of using Break Even analysis. 5 Marks
