Question 1.

XYZ Ltd manufactures and sells only one product. The product is sold at Sh 10 per unit. Other details are as follows;

• variable cost per unit Sh 5
• fixed cost per month Sh 20,000
• normal sales per month 6,000 unit

Required;

1. calculate the contribution per unit
2. calculate the break-even point in units
3. calculate the margin of safety
4. draw a break-even graph which clearly indicates the break-even point
5. suppose the variable cost increases to Sh 6 per unit and fixed cost decreases to Sh 18,000. calculate how many units to be sold in order to break-even