CoursHeroTranscribedText: QUESTION ONE: COST-VOLUME-PROFIT RELATIONSHIPS Bedford Park Limestone produces limestone sheeting used for the facings of buildings. The statement of prot or loss presented below represents Bedford Park Limestone's operating results for the year just ended. Bedford Park Limestone Contribution Margin Statement of Prot or Loss For the year ended 31 December 20X2 Sales $900,000 Less variable costs Variable manufacturing costs $315,000 Variable selling costs 180,000 495,000 Contribution margin 405,000 Less fixed costs Fixed manufacturing costs $100,000 Fixed selling costs 107,500 Fixed administrative costs 40,000 247,500 Net Prot $157,500 Bedford Park Limestone sold 1,800 tonnes of limestone sheeting during the year ended 31 December 20x2. The manufacturing capacity of the rm's facilities is 3,000 tonnes par annum. Additional information You can ignore income taxes for the purposes of this question. Reguired (3) Calculate the company's break-even volume, in tonnes, for the year ended 31 December 20x2. [3 Marks] (b) What is the expected profit for the year ended 31 December 20x3 if next year's estimated sales volume is 2,100 tonnes and if prices and costs stay at the same levels and rates as they were last year? [2 Marks] (0) The company has a potential overseas customer who has offered to buy 1,500 tonnes at $450 per tonne. Assume that all the firm's costs would be at the same levels and rates as they were last year. What prot would the firm earn next year if it took the order and rejected some business from regular customers so as not to exceed capacity? [3 Marks] (d) Bedford Park Limestone plans to market its product in a new territory. Management estimates that an advertising and promotion program costing $61,500 per annum would be needed for the next two or three years. In addition, a $25 per tonne sales commission to the sales force in the new territory, over and (0 above the current commission, would be required. How many tonnes would have to be sold in the new territory to maintain the firm's current net profit? Assume sales and costs will continue as in the year just ended in the firm's established territories. [4 Marks] Management is considering replacing its labour-intensive manufacturing process with an automated production system. This would result in an increase of $58,500 annually in fixed manufacturing costs. The variable manufacturing costs would decrease by $25 per tonne. Calculate the new break-even volume in tonnes and sales dollars. [3 Marks] Ignore the facts presented in requirement (e). Assume that management estimates that the selling price per tonne will decline by 10 per cent next year. Variable costs will increase by $40 per tonne and fixed costs will not change. What sales volume in dollars and tonnes would be required to earn a net prot of $94,500 next year? [3 Marks] [Total = 18 Marks]