(a) A break-even chart is shown below for Windhurst Ltd.

You are required: (i) to identify the components of the break-even chart labelled p, q, r, s, t, u, v, w, x and y; (5 marks) (ii) to suggest what events are represented at the values of x that are labelled m and n on the chart; (3 marks) (iii) to assess the usefulness of break-even analysis to senior management of a small company. (7 marks)

(b) Hackett Ltd produces gudgeons and bludgeons. The company's budget for 2000 includes the following data:

The budget is designed to show a figure of profit or loss for each product, after apportioning joint fixed costs of 100 000 in proportion to the number of units of each product sold. For 2000 gudgeons are budgeted to show a profit of 14000, and bludgeons a loss of 2000. The number of units of each product sold is expected to be equal. You are required to write a report to the managing director of Hackett Ltd advising him on the basis of the information given whether to implement any of the following three proposals:

(4 marks) (i) to increase the price of bludgeons by 25%, in the expectation that the price elasticity of demand over this range of prices will be unity; (ii) to make changes to the production process that would reduce the joint fixed costs by 12.5% and increase the variable costs of each product by 10%; (iii) to introduce both of the above changes.