Motormusic Ltd makes a standard model of car radio, which it sells to car manufacturers for £60 each. Next year the business plans to make and sell 20,000 radios. The business’s costs are as follows:

Manufacturing Variable materials £20 per radio Variable labour £14 per radio Other variable costs £12 per radio Fixed cost £80,000 per year Administration and selling Variable £3 per radio Fixed £60,000 per year Required:

(a) Calculate the break-even point for next year, expressed both in quantity of radios and sales value.

(b) Calculate the margin of safety for next year, expressed both in quantity of radios and sales value.

Exercises CHAPTER 9 Cost–volume–356 profit analysis AppendixLO1