Question
Beyonca Ltd is a small manufacturing business which processes and sells a special type of herbal tea to distributors as well as retail outlets. Below
Beyonca Ltd is a small manufacturing business which processes and sells a special type of herbal tea to distributors as well as retail outlets.
Below are current selling prices and variable costs per kg, as well as fixed costs for the current period.
Selling price | 6.60 | |
Variable | ||
Tea leaves | 1.4 | |
Processing | 0.6 | |
Packaging | 0.55 | |
Distribution | 0.2 | |
Fixed | ||
Retailers shelving fee | 60,000 | |
Production Equipment | 15,000 | |
Promotional costs | 80,000 |
To boost profits for the future period, a marketing plan has been completed which involves spending 15,000 more on advertising and raising the selling price by 5%. It has been estimated that variable costs will need to increase to 3 per kg because of production and sales output increasing from 90,000 kg to 105,000 kg. To increase productive capacity, a one-off cost of 22,000 will be incurred.
- i.According to Beyonca Ltd's marketing plan, what would be the new profit or loss?
- ii.What would be the new break-even point, in units, for the year?
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