Question 1 (30 marks)

Mr. King graduated with a master degree in computer science; he started and operated King Company since 2010. King Company produces and sells product X. During year 2020, the selling price of each product X was $800. The total production and sales unit for 2020 were both 17,000 units. There was no opening inventory and closing inventory.

The companys accountant has prepared the following data for the year ended 31 December 2020.

	$000
Fixed costs
Manufacturing	800
Administrative	2,240
Selling	1,280
Total fixed costs	4,320
Variable cost (per each product X)	$
Direct materials	256
Direct labour	104
Variable overhead	80
Total variable costs	440

Required:

(a)	Calculate the breakeven point of Product X in sales units and in sales dollars for 2020.	(12 marks)
(b)	Calculate the required sales of Product X in units if King Company would like to earn $720,000.	(6 marks)
(c)	Assuming that there are no changes in unit selling price, product variable cost structure or amount of fixed costs, calculate the percentage increase in units sold in the following year to produce a profit 20% higher than that of the year ended 31 December 2020.	(12 marks)