Mr Brown runs a shoe shop in a residential area of North London. His income statement for the year ending 31 March 19_3 is as follows:

Mr Brown has been offered a larger shop in a new shopping centre. Rent, rates, lighting, and heating of the new shop will be £30-000 p.a. He would need an extra shop assistant. He reckons his sales would increase_by-25% , but he would have to spend £2 000 p.a. on advertising.

Required:

(a) Calculate Mr Brown’s (i) existing break-even point (ii) break-even point of proposed new shop, and (iii) income statement of the new shop if all the assumptions hold.

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VSales [5 000 units at 20 each] V Cost of sales [5 000 units at 12 each] 100 000 60.000 40 000 Rent, rates, lighting, and heating 20 000 F Shop assistant's salary 5.000 25 000 15 000