Murray Limited makes and sells a single product and in 2021, planned to sell 6,000 units.

Details of the cost per unit include the following:

Direct material 75

Direct labour (30 minutes per unit) 30 per hour

Variable manufacturing overhead 20

Variable selling expenses 5

Variable administrative expenses 10

Fixed costs for the year ended 31 December 2021 were:

Fixed manufacturing 150,000

Fixed selling and distribution 40,000

Fixed administrative 65,000

During 2021, the company produced its planned output level of 6,000 units, which it sold for 200 per unit.

In 2022, fixed costs are expected to increase by 77,500 and variable costs by 8%.

Therefore, management has decided to increase the selling price by 15%.

It is thought that the customers will be willing to pay this increased price and therefore, the company plans to produce and sell the same quantity in 2022 as in 2021.

Required:

(a). Calculate the following for each of the two years 2021 and 2022:

The breakeven point in terms of:

the number of units required to be produced and sold

the sales revenue required to break even

the margin of safety expressed in units for each year.

(b). Comment on the results you have obtained in part (a) above, explaining how the figures obtained may help management in planning and decision making.

c. (i) Calculate the profit for both 2021 and 2022

(ii) Discuss and interpret the results