Cords Pic manufactures a style of corduroy trousers that it sold last year at £18 a pair. The cost specifications for these trousers were as follows:

Variable costs per pair of trousers Materials Labour Fixed overheads per month Cords Pic made a profit of £11040 each month.

£

6.50 3.50

£26400

(a) How many pairs of trousers did Cords Pic sell each month?

(b) Cords Pic is now planning next year's operations. The Sales Director is proposing to boost sales by reducing the selling price to £17 and spending an additional £3000 per month on advertising. She estimates that these actions will enable the company to sell 5800 pairs of trousers each month.

Evaluate the Sales Director's proposals taking into account their expected impact on profits and on the breakeven point. State any assumptions you need to make.

(c) If the Managing Director of Cords Pic were to require that next year's profit show a 15% increase over last year's performance, how many pairs of trousers would have to be sold each month (i) assuming that the Sales Director's policies were adopted and (ii) assuming that they were not.