A summary of a manufacturing company$$s budgeted profit statement for its next financial year,

when it expects to be operating at $75$ per cent of capacity, is given below.

$$

Sales $9,000$ units at ghc $32288,000$

Less:

direct materials ghc $54,000$

direct wages ghc $72,000$

production overhead $$ fixed ghc $42,000$

$$ variable ghc $18,000$

ghc $186,000$

Gross profit ghc$102,000$

Less: admin., selling and dist$$n costs:

$$ fixed ghc $36,000$

$$ varying with sales volume ghc $27,000$

ghc $63,000$

Net profit ghc $39,000$

It has been estimated that:

$($i$)$ if the selling price per unit were reduced to ghc $28,$ the increased demand would utilise $90$ per

cent of the company$$s capacity without any additional advertising expenditure;

$($ii$)$ to attract sufficient demand to utilise full capacity would require a $15$ per cent reduction in the

current selling price and a ghc $5,000$ special advertising campaign.

You are required to:

$($a$)$ calculate the breakeven point in units, based on the original budget;

$($b$)$ calculate the profits and breakeven points which would result from each of the two alternatives

and compare them with the original budgetA summary of a manufacturing company's budgeted profit statement for its next financial year,

when it expects to be operating at $75$ per cent of capacity, is given below.

Sales $9,000$ units at $32$

c

Less:

Gross profit

Less: admin., selling and dist' $n$ costs:

fixed

$36,000$

varying with sales volume

$27,{000}_{?}$

Net profit

$63,{000}_{?}$

It has been estimated that:

$($i$)$ if the selling price per unit were reduced to $228,$ the increased demand would utilise $90$ per

cent of the company's capacity without any additional advertising expenditure;

$($ii$)$ to attract sufficient demand to utilise full capacity would require a $15$ per cent reduction in the

current selling price and a $5,000$ special advertising campaign.

You are required to:

$($a$)$ calculate the breakeven point in units, based on the original budget;

$($b$)$ calculate the profits and breakeven points which would result from each of the two alternatives

and compare them with the original budget.