Neal Electronics Ltd produces two types of memory sticks: a Student Memory Stick and a Professor Memory Stick. The Student Memory Stick sells for $35, and the Professor Memory Stick sells for $100. The companys income statement for the month of September is given below:

	Student Memory Stick		Professor Memory Stick
Sales for the September month	20,000 units		5,000 units
	Per unit ($)	Total $	Per unit ($)	Total $
Sales	$35	$700,000	$100	$500,000
Less Costs
Direct material cost	$5	100,000	$15	75,000
Direct labour cost	$4	80,000	$10	50,000
Variable overhead	$1	20,000	$5	25,000
Fixed Costs	$6	120,000	$11	55,000
Total Costs	$16	$320,000	$41	205,000
Net Profit/(Loss)		$380,000		$295,000

Required:

1. Calculate the breakeven for each of the following situations:

1. If the company made only the Student Memory Stick, what would the breakeven point in units and dollars be for the month of September?
2. If the company made only the Professor Memory Stick, what would the breakeven point in units and dollars be for the month of September?
3. Determine the combined breakeven point in units if the company makes a combination of Student and Professor Memory sticks in the ratio 4:1. Show clearly the breakeven units and dollars (using the ratio given) for the Student Memory Stick and Professor Memory Stick under this combined breakeven point.

Calculate the margin of safety percentage for the combined production of Student and Professor Memory sticks for the month of September. Explain what this percentage means for the company

For the month of October the company is considering the use of a new sophisticated method to produce the memory sticks. If the new method is adopted for both types of memory sticks, fixed costs for both products per month will increase by 20% but direct materials, direct labour and variable overhead costs will all decrease by 10%. The October month expected sales and unit selling price will be the same as the month of September. Would you recommend that the company adopt the new method? Determine the expected profit to be made for the October month and use this calculation to explain your answer.

	Student Memory Stick		Professor Memory Stick
Sales for the October month	20,000 units		5,000 units
	Per unit ($)	Total $	Per unit ($)	Total $
Sales	$35	$700,000	$100	500,000
Less Costs
Direct material cost
Direct labour cost
Variable overhead
Fixed Costs
Total Costs
Net Profit/(Loss)