Question 2 Adelaide plc manufacture 5G phones which have superfast internet. In preparation for next year's budgets, Adelaide plc is planning to produce a fast and thin phone "Phoni" and they expected the cost of one unit of Phoni to be as follows: Direct materials (per unit) Direct labour cost (per unit) Other variable manufacturing costs (per unit) Annual fixed costs 200 40 20 3,510,000 Phoni is expected to have a big share in the phone market and has huge sales. The expected sales for the coming year are 10,400 phones at a selling price of 650. Required: The managing director of Adelaide plc has hired you as a management accountant and requested you to calculate the following information to present in the board meeting: a) The break-even sales both in number of phones and revenue () (4 marks) b) The margin of safety in number of phones and briefly explain what this figure means. (4 marks) c) The number of phones to be sold to make a profit of 1,170,000. (3 marks) d) Suggest, with supporting calculations, which of the following two strategies (if any) that the directors of Adelaide plc should be adopted: Strategy (1) The marketing director has suggested to spend 350,000 on advertising campaign which is expected to increase demand (sales) by 20% in the next year. Strategy (2) The finance director argued that it is necessary for Phoni to have a 30MP front- facing camera which would increase its direct materials cost by 10%. Consequently, they have decided to increase the selling price by 8% and expect the sales to increase to 11,000 phones. Other costs are expected to remain the same. (8 marks) e) Discuss the main assumptions/limitations of the break-even analysis in making management decisions. (6 marks) (Total: 25 marks)