A factory manufactures two main products.

Product X has unit costs of production during a trading year as follows:

$

Components 325

Labour 240

Production overheads 85

Distribution expenses 60

All the cost of the components varies directly with the number of units produced. 65% of the labour costs vary directly with the number of units produced. The production overheads do not vary with the number of units produced. 85% of the distribution expenses vary directly with the number of units produced.

(a) Calculate the variable cost per unit and the fixed cost per unit for the trading year

Product Y has fixed costs of $1,200,000 and variable costs per unit of $785 during a trading year. It is sold to wholesalers at $870 per unit.

(b) Calculate

(i) the number of units that must be sold in order to break even

(ii) the level of output required to provide a profit of $500,000