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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
- Calculate the break-even units for 2021
- Calculate the profit achieved in 2021
- 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.
- Would you recommend the change in advertising strategy to increase variable marketing costs by $16 per unit? Explain your reasons.
- Explain how mangers could utilise break-even analysis to assess investment projects.
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