Question 4 Part A James is a carpenter and he builds shelves for cupboards and sells them to several hardware shops - the maximum production possible is 500 shelves per year. Sales for the next year are expected to be 350 units and the selling price of each shelf is $250. Fixed costs are estimated at $24,000 per year and the cost of making each shelf is calculated as follows: material costs $55 labour costs $45 (1.5 hrs @$30 per hr) . Required: Calculate: 1. the breakeven point per year (in units) 2. the maximum possible profit per year 3. the target sales in dollars if the target profit is $15,000 for the year. Answer to Part A Question 4 Part B Question 4 con 1920 per year at the following cost Question 4 Part B Question 4 Part B Assume that James has discovered a new kind of wood that would improve the quality of his shelves. Fixed costs remain the same ($24,000 per year) but the following costs are changed: material costs increase by 20% labour costs increase to 2 hrs @ $30 per hour James also increased the selling price to $280 per shelf. Required: Calculate: 1. the new breakeven point per year (in units) and 2. the margin of safety in dollars and percentage terms, given that the current sales volume of 500 shelves per year Answer to Part B