The Norman Co. produces a product which sells at $20. Sales amounting to $5 million represent 75 per cent of capacity of the factory, and that percentage is regarded as the normal level of activity which cost as follows:

Including variable cost $
75000 63000 40000 167 The commission payable for the promotion of the product averages 2 per cent of the sales value.
REQUIRED:
1. Calculate the break-even activity level respectively at the maximum and normal capacity levels:
2. Prepare statements showing sales income, cost and profit:

(a) at the normal level of activity

(b) if the unit selling price is reduced by 12 per cent, thereby increasing the sales volume by 20 per cent of the normal level

(c) if the unit selling price is reduced by 20 per cent, thereby increasing the sales volume by 60 per cent of the normal activity level 3. Calculate the PfV ratio at tlie three levels of activity referred to in 2 above