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7 Kaplan Ltd operates a single-product entity. Data relating to the product for 2021 were as follows. Annual volume 128,000 units Selling price per unit

7 Kaplan Ltd operates a single-product entity. Data relating to the product for 2021 were as follows.

Annual volume

128,000 units

Selling price per unit

$240

Variable manufacturing cost per unit

$112

Annual fixed manufacturing costs

$480,000

Variable marketing cost per unit

$48

Annual fixed non-manufacturing costs

$1,440,000

Required

  1. Calculate the break-even units for 2021
  2. Calculate the profit achieved in 2021
  3. Changes in advertising strategy are planned for 2022. This would increase variable marketing costs by $16 per unit, and reduce fixed manufacturing costs by $320,000 per year. Calculate the units that need to be sold in 2022 to achieve the same profit as in 2021.
  4. Would you recommend the change in advertising strategy to increase variable marketing costs by $16 per unit? Explain your reasons.
  5. Explain how mangers could utilise break-even analysis to assess investment projects.

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