(a) Discuss four (4) assumptions underlying the Cost-Volume-Profit (CVP) analysisDiscuss Margin of Safety and its relevance to business profitabilityDiscuss the rule underlying the Net Present Value (NPV) technique to capital budgetingDiscuss the rule for the Internal rate of Return (IRR) technique to capital budgeting

(b) A company manufactures a single product which has the following cost and selling price structure per unit:

GHGH

Selling Price180

Direct Material32

Direct Labour66

Variable overheads 18

Fixed overhead24140

Profit40

The fixed overhead absorption rate is based on a normal capacity of 2000 units per month. Assume that the same amount is spent each month on fixed overheads. Budgeted sales for next month are 2,200 units

Required:

1. Calculate the breakeven point, in sales units and value per month.

2. Calculate the margin of safety for next month.

3. Calculate the budgeted prot for next month. Calculate the sales required to achieve a prot of GHS96,000 in a month.