A The relationship between income/cost/volume suggests that there are four ways by which profit can be increased. These are:

1 Increase unit selling price.

2 Decrease unit variable cost.

3 Decrease fixed costs.

4 Increase volume.

Assume that the current situation for a product is as follows:

Sales volume 1,000 units Selling price

\(£ 2\) each

\(£ 1\) per unit Fixed costs

\(£ 500\)

\section*{You are required to:}

(a) draw four separate break-even charts showing the effect of the following changes on the current situation:

(i) a 10 per cent increase in volume,

(ii) a 10 per cent increase in unit selling price,

(iii) a 10 per cent decrease in unit variable cost,

(iv) a 10 per cent reduction in fixed costs.

(b) Use your charts to state the additional profit resulting from each change.