(

a) Discuss assumptions and limitations of break-even analysis.

(

b) A firm has purchased a plant to manufacture a new product. Cost data for the plant is given below:

298 Part III: PRODUCTION AND COST ANALYSIS Estimated annual sales 24,000 units Estimated costs:

Material

`4.00 per unit Direct Labour

`0.60 per unit Overhead

`24,000 per year Administrative Expenses

`28,000 per year Selling cost of sales

`1,590 per year

( i) Calculate the selling price if profit per unit is `1.02 and

( ii) Find out the break-even point in terms of output.