a)Jonny furniture Ltd makes Modern School desks. The fixed costs of operating the workshop for a total GHS20,000. Each desk requires materials which cost GHS20. Each desk takes two hours to make and the company pays the carpenters GHS30 per hour. The carpenters are all engaged on contracts such that if they do not work for any reason, they are not paid. The desks are sold to a wholesaler for GHS100 each.

Required:

i.Determine the break-even point both in units and sales for the business

(b) Jonny Furniture Ltd expects to sell 2,800 desks a month. The business has the opportunity to use a special desk machine. Doing so would increase the total fixed costs of operating the workshop for a month to GHS80,000. Using the machine would reduce the labour time to one hour per desk. The wage rate remains unchanged.

Required:

i.Determine the break-even point in units if machine is used.

ii.How much profit would the business make a month from selling desks assuming the machine is not used and assuming the machine is used?