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Part 1 Carnival Handy Bag Limited (Handy Bag) manufactures and sells a single product. The following information is available for three years ending 30 September
Part 1 Carnival Handy Bag Limited (Handy Bag") manufactures and sells a single product. The following information is available for three years ending 30 September Price per Unit volume 2011 130 S0 52 2012 2013 1285 201 2012 2013 50 55 55 01112 15 31.5 33 production overhead 16 1 sales overhead costs for the year production overhead fxed overhead 50 55 5 200 220 220 1. When the management of Handy Bag prepared its direct labour forecast unit cost for 2012 and 2013, direct wages were increased only by the forecast rate of inflation The trade union representatives of the production workers wished to press for a greater wage increase. They suggested hat L. Direct wages be increased at twice the rate of infation. The effect of this would be to increase direct labour costs per unit as follows 2012 2013 Direct labour 33.0 35.0 IL. Unit selling prices be increased in order to cover the increased labour costs It is to be assumed that all expense and revenue relationships will be unchanged except where indicated A schedule for 2011, 2012. 2013 for Handy Bag Lad showing 1, the break-even points 2. the net profit for each year your calculations on the original labour costs Marks 10) A graph showing a break-even point for 2012 Marks 3) Advise Handy Bag management as to their response to the trade union's claim for Marks 7 Marks 5) higher wages. Include relevant Sinancial analysis Explain the limitation of break-even analysis in the contest of the
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