4. Fill in the table and calculate the margin of safety relating to each option (without and with the machine). What advice would you give Springtime LTD about renting the machine, on the basis of the margin of safety? without the machine (N of baskets) 500 with the machine (N of baskets) 500 (a) Expected volume of sales (b) Breakeven point Margin of safety (the difference btw (a) and (b)) Expressed as a % of expected volume of sales 1. Springtime LTD makes baskets. The fixed costs of operating the workshop for a month totals 500 $. Each basket requires materials that cost 2$ and takes one hour to make. The business pays the basket makers 10 $ an hour. The basket makers are all on contracts such that they do not work for any reason, they are not paid. The baskets are sold to a wholesaler for 14$ each. What is the breakeven point for basket making for the business in N of baskets)? With Machines: Profit - $ 500 BEP - 429 baskets Contribution - $ 7 per unit Without Machines: Profit - $ 500 BEP - 250 baskets Contribution - $ 2 per unit So, The profit is the same, when amount of BEP has increased to 429 but the demand is less than 429, then machine should not be rented 2. Springtime LTD expects to sell 500 baskets a month. The business has the opportunity to rent a basket-making machine. Doing so would increase the total fixed cost of operating the workshop for a month to 3000 $. Using the machine would reduce the labor time to half an hour per basket. The basket makers would still be paid 10$ an hour. How much profit would the business make each month from selling baskets a a) Without the machine; b) With the machine? What is the breakeven point if the machine is rented? What do you notice about the figures that you calculate