Is it possible to help me with this question? please

Edward Company Limited manufactures and distributes a new drug (Classic) that relieves tension and reduces inhibitions. The companys target market is the entertainment industry in the United Kingdom. The company prices the drug at full cost plus 100%.

The current variable costs of production are as follow:

Ingredient X: 8 mgs @ 10 per mg

Labour: 5 minutes @80 per hour

Ampoules: 1 @ 1.50 per ampoule

The companys fixed cost (which includes the cost of distribution) are currently 320,000 per annum and absorbed based on budgeted production for the year.

The company is currently setting the price of the drug for the coming year and wishes to take into account expected price increases attached to the various elements of cost.

These are as follows:

Element of cost Expected price increase

Ingredients X 10%

Labour rate 50%

Ampoules 33 1 /3%

Fixed costs 12 1 /2%

The budgeted figure of the companys production and sales for the coming year is 9,000 units of Classic drug. Having received the projected profit figure for the coming year, the CEO has asked the market protection unit to help in producing a more sophisticated approach to pricing. The unit has investigated the market and believes that, with some influence being exercised on clients, the following demand pattern will emerge:

Selling price $ Demand Units

200 17,000

220 16,000

240 15,000

. 260 11,000

280 9,000

300 7,000

You are required to calculate:

a) The selling price of Classic drug for the coming year on the companys usual basis (10 Marks)

b) The companys profit at the budgeted level of activity (2 Marks)

c) The break-even point in units and sales volume (2 Marks)

d) The profit /volume ratio (2 Marks)

e) The maximum amount that the company should be prepared to spend advertising to increase sales to 10,000 units (2 Marks)

f) The optimal selling price and production level (with supporting calculations) assuming that the demand pattern shown above is accurate (10 Marks)

g) The additional profit (if any) compared to the selling price calculated in (a) above. (2 Marks) (Total 30 Marks)