Self-test First Aid Ltd manufactures bandages and dressings which are supplied to doctors’

surgeries, nursing homes and hospitals.

The company advises you of the following:

Sales (in units) per month Product Doctors Nursing Hospitals Total units Total units homes per month per year Bandages 1,200 1,800 3,900 6,900 82,800 Dressings 1,700 1,300 2,400 5,400 64,800 There is no trend and the company uses the above information for its annual sales budget.

The selling price of bandages is £1.00 each and dressings are £1.40 each.

To produce the above, the company has invested in a number of machines for which they paid a total price of £28,000. These machines have an expected life of 10 years with a residual value of £2,000. The company writes off the machines using the straight line method. Costs are apportioned between bandages and dressings in the ratio of 7:3.

Other costs in the factory are:

Bandages Dressings Direct material 30p per bandage 45p per unit Direct labour 28p per bandage 52p per unit Variable overheads £1.80 per hour £2.40 per hour Production time per unit 3 minutes 6 minutes Rental for the premises is £36,000 p.a.

You are required to calculate the break-even point in units for both products.

Prepare a budget showing the profit or loss account for the year ending 31 December 2011.