Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below:

Budgeted sales 10,000 units

Sales 2,000,000

Direct Materials 800,000

Direct Labour 400,000

Fixed Overheads 500,000

Total costs 1,700,000

Total Profit 300,000

a) Produce a profit statement for the year ending 31 December 2012, assuming actual sales are 12,000 units.

b) Calculate the break-even point for the year ending 31 December 2012 and the margin of safety expressed as a percentage of the original budgeted sales.

c) Calculate the revised break even point if a new wage settlement increases direct labour costs by 20%.

d) Assuming sales of 10,000 units are achieved, and the new wage settlement is never agreed, calculate the selling price per unit that would earn a total profit of 500,000.

e) Discuss the limitations of break even analysis