Below is information relating to the “Unique”, the only product made by Bravo Ltd. £ Sales (7,800 units @ £25) 195,000 Less: Variable Production Costs (85,800) Less: Variable Admin, Selling and Distribution Costs (15,600) Total Contribution 93,600 Less: Fixed Production Costs (42,000) Less: Fixed Admin, Selling and Distribution Costs (36,000) Net Profit 15,600 This information is based on a budgeted sales and production volume of 7,800 units. There will be no opening or closing inventory. Required:

(a) Calculate the break-even point in units sold and in £s.

(b) Calculate the margin of safety in units and in £s.

(c) The Managing Director of Bravo Ltd believes that if the selling price is reduced from £25 to £21 per unit, sales volume will increase to 8,600. In addition, new machinery will cost £6,000 to hire but will reduce material costs by £0.50 per unit. What will be the new expected profit and the new break even?

(d) Advise the Managing Director whether you think the price change should be made, stating any weaknesses that might arise with break-even analysis.