Macro Hardware Limited manufactures produces a single product. The companys profit and loss account for the year ended 31/12/2000, during which

SECTION 3 (80 Marks) Answer ONE question

70,000 units were produced and sold, was as follows:

Sales (70,000 units) Materials

Direct labour Factory overheads Administration expenses Selling expenses

Net profit

315,000 175,000 63,000 105,000

910,000

85,000 743,000 167,000

The materials, direct labour and 40% of the factory overheads are variable costs. Apart from sales commission of 5% of sales, selling and administration expenses are fixed.

You are required to calculate:

(a) The companys break-even point and margin of safety. (b) The number of units that must be sold in 2001 if the company is to increase its net profit by 20% over the 2000

figure, assuming the selling price and cost levels and percentages remain unchanged. (c) The profit the company would make in 2001 if it reduced its selling price to 12, increased fixed costs by 11,000

and thereby increased the number of units sold to 85,000, with all other cost levels and percentages remaining

unchanged. (d) The selling price the company must charge per unit in 2001, if fixed costs are increased by 10% but the volume of

sales and the profit remain the same. (e) The number of units that must be sold at 14 per unit to provide a profit of 10% of the sales revenue received from

these same units.