4.

You are the chief accountant at Bate Ltd, which has a manufacturing process with the following cost and income projections for the next year:

Fixed costs: 100,000

Variable costs per unit: 46

Sales value per unit: 58

a) Calculate the break-even point for this projection: .(Round to nearest ). (and provide a working, 4 marks)

Working:

b) The CEO is not convinced that fixed costs are really fixed and asks you to complete a sensitivity analysis for your calculation, varying each element noted above + or 5%. Calculate the % change in breakeven points for each potential variation. Which of the elements above is the model most sensitive to a change in: select one from the following:(and provide a brief explanation, 4 marks)

1. Fixed cost
2. Variable cost per unit
3. Sales value per unit

Explanation: