A business makes one standard product with the following revenue and expense profile:

Selling price £20 per unit Direct labour £5 per unit Direct material £4 per unit Variable overhead £3 per unit Fixed overhead:
0-4,999 units £32,000 5,000-9,999 units £44,000 Over 10,000 units £60,000 Required:

(a) Prepare a break-even graph and read off the break-even point(s)
in terms of volume and sales value.

(b) Convert the break-even chart into a profit volume chart.

(c) What is the margin of safety at 8,500 units?

(d) Calculate the profit which will be made if 14,000 units are sold.

(e) Explain the assumptions inherent in this type of analysis.

Transcribed Image Text:

Selling price Direct labour 20 per unit 5 per unit Direct material 4 per unit Variable overhead 3 per unit Fixed overhead: 0-4,999 units 32,000 5,000-9,999 units 44,000 Over 10,000 units 60,000