Gum Ltd has the following information available for one of its bestselling products:

NovemberDecemberBudgeted Sales Revenue ()31,5001,500Budgeted Profit ()1,500(500)Total Units1,05050

1a) Using the High Low approach or something similar, calculate Gum Ltd.'s variable cost per unit and total fixed expenses for November. (4 marks)

1b) What is Gum Ltd.'s break-even point in units for November? (4 marks)

1c) What is Gum Ltd.s margin of safety in units for November? (2 marks)

1d) Discuss in detail the importance of the breakeven point and margin of safety to a business. (5 marks)

In January next year the following changes are predicted (Additional Information):

• variable cost per unit will increase by 10%
• fixed costs will fall by 25%
• profit should be 7,000
• the number of units to be sold will be 2,000 units

1e) Using your calculations in 1a) along with the additional information for January, calculate the new selling price per unit required to achieve the above (5 marks)

1f) Explain in detail the meaning and uses of contribution (5 marks)