Analysis Investment

Part 1 The following data relates to the monthly costs at different levels of activity for a manufacturing plant: 400 800 2,000 2,000 1,400 Output levels (units sold): Costs Delivery costs Administrative costs Gas and electricity costs Labour costs Production Supervisor salary Materials Telephone Quality Control 5,000 4,000 2,000 2,800 10,000 6,000 2,000 1,400 6,000 1,000 700 1,200 1,500 Not included above is insurance for the factory at 12,000 per year. Quality control costs depend on the production levels. For up to 500 units per month, the costs are 1,200. Up to 1,000 units they are 1,500 and they rise again by 300 for each additional 500 units. Required: Answer the following questions and clearly show your workings: D) For each item state the appropriate cost behavior. (5 marks) i) Assuming that the pattern of cost behaviour remains the same, calculate the expected cost of all cost items at an output level of 1,600 units. (18 marks) Calculate the break-even price at the activity level in part (ii) above