(a) Explain to a non-accounting colleague how you would calculate the break-even point of a company manufacturing and selling one type of product.

(b) ‘If a company Bs its selling price by 10% and sales volume increases by 11% then the profit earned by the company would not change.’

Examine the validity of the above statement.

(c) The management of a company is considering automating most of its manufacturing operations. This change would result in a significant reduction in variable costs, but the increase in fixed overheads would be such that, at current levels of activity, profits would not change.
Discuss the possible effects of this proposed change on the future profits of the company. (4 marks)

(d) Consider the effect on a company’s reported profit of an increase in production volume with no corresponding increase in sales volume.