XYZ Industries has introduced a new product. It is estimated that the fixed costs will be £16 740 per year, and that the variable costs will be £18 per tonne. The selling price will be £45 per tonne. Output is expected to be 900 tonnes per year.

(a) Calculate:

(i) The amount of ‘contribution’ per tonne;

(ii) The break-even output and income. (6 marks)

(b) Prepare a break-even chart showing clearly the angle of incidence, the break-even point, and the margin of safety at the expected level of output. (6 marks)

(c) Describe briefly the main limitations of break-even charts.