19.11A Fallon Frodsham Limited manufactures and installs small prefabricated building structures that are sold to people who want to establish a home office using part of their gardens. Each prefabricated building sells at £13 000, including installation costs. The variable costs of manufacture are £7300 per building. The company's directors have set a sales target of 150 buildings for the 20X5 accounting year.

i) Using a break-even chart, estimate the maximum level of fixed costs the company can incur in 20X5 without making a loss, on the assumption that the sales target is met.

ii) Apply the break-even formula to calculate the maximum level of fixed costs.

Tutorial note: This question may require some thought. Known factors are total revenues (sales revenue per unit x number of units sold), and total variable costs (variable costs per unit x number of units sold). The point on the horizontal (x) axis at which break-even point is reached is also known (150 units). The line must be drawn from that point upwards to the point where it intersects with the total revenue line.