Foamy Ltd. plans to produce a coffee-based drink called Alert. It is anticipated that variable costs will amount to 40p per drink. The company will produce Alert in a processing facility with a capacity to produce 200,000 drinks a year. Fixed costs are anticipated to be 100,000 per year. The company plans to supply to retailers at a price of 95p per drink. Required: a. Calculate the break-even volume, at the expected price, to retailers. b. Calculate the break-even sales price to retailers if the factory is used at full capacity.

Market research carried out by Foamy Ltd has demonstrated that for sales at a price of 1.90 per drink demand from retailers would be zero, and that demand will increase, on a straight-line basis, by 20,000 drinks for every 10p (0.10) fall in price. Required: c. Calculate the sales price at which the companys profit will be maximised, and the profit the company will make at that sales price.