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Breakeven analysis Wits Manufacturers Ltd (WM), manufactures and sells three different types of potato chips. Sales have increased recently due to the general increase in
Breakeven analysis Wits Manufacturers Ltd (WM), manufactures and sells three different types of potato chips. Sales have increased recently due to the general increase in consumption of snack food in South Africa. WM sells three different flavours of chips, namely salt and vinegar, pumpkin and ricotta cheese and caviar and prawn. The projected income statement for the 2023 financial year is expected to be as follows: Management advises you that variable expenses can be divided between the three types of chips in the ratio 2:3:2. Each of the three different types of chips can be allocated an equal share of the fixed expenses. REQUIRED a) Calculate the sales revenue that must be earneld from the pumpkin and ricotta flavour to break even. b) Calculate the sales volume that must be generated from the sale of the caviar and prawn flavour to break even. c) If 145000 packets of pumpkin and ricotta flavour are sold, what is the margin of safety ratio for this flavour at this level of sales? Explain what your answer means. d) What advice would you give to management regarding the various product lines that the company manufactures
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