Multi-Make Ltd manufactures self-assemble radio kits.Each unit sells for $8, and the business has a relevant range of production between 30 000 and 60 000 units per year. The budget for the coming year is as follows:

Sales (50,000 units) Less variable costs Manufacturing

Direct Material Direct Labour Variable Overhead

Total Manufacturing Marketing

Advertising salaries Total Variable cost Contribution Margin Less Fixed costs

Manufacturing

Marketing Total Fixed Cost

Profit before tax

Required:

$400,000

$87,500 $57,500 $50,000

$195,000 $105,000

$ 45,000 $ 27,000

$300,000

$ 72,000

$28,000

a) The company wishes to know what sales are required to achieve a profit before tax of $45,000? (5 Marks)

b) The firm also wants to know what sales are necessary to provide a profit of 10% on sales ? (5 Marks)

c) Explain and describe the meaning of outcome a and b. (5 Marks)