QUESTION 4 Roadrunner Ltd sells biscuits in boxes to supermarkets throughout the country. In the financial year ended 30 June 2021, the company sold a total of 500,000 boxes of biscuits at $4 per box. The gross profit margin achieved on these sales was 75%. Operating expenses consisted of the following: $ Advertising 100,000 Staff salaries 500,000 Other administrative expenses 600,000 Cost of sales are considered as variable costs, and all other expenses are treated as fixed costs. Required: a) Calculate the contribution margin per box of biscuits. (1 mark) b) Calculate the breakeven number of boxes. What is the breakeven sales amount? (1% marks) c) Calculate the profit or loss earned in the financial year ended 30 June 2021. (1% marks) d) Roadrunner Ltd plans to achieve a target net profit of $750,000 in the next financial year. How many boxes of biscuits should be sold to achieve this target net profit? (1 mark) e) Roadrunner Ltd is considering outsourcing part of the processing functions to another company in a bid to better manage costs. Outsourcing will enable the company to reduce the fixed costs by 15%, but would increase the variable cost per box by $0.50. Calculate the number of boxes to be sold if Roadrunner Ltd wishes to achieve the same amount of net profit in part (c). Advise whether or not the proposed outsourcing is a better option. Discuss quantitative and qualitative factors. Show all workings to secure maximum marks. (3 marks) f) Roadrunner Ltd is also considering introducing a "Low Sugar" variety of its biscuits. The "Low Sugar" biscuits will sell for $4.50 per box. As the "Low Sugar" biscuits will involve adding artificial sweeteners which are more expensive than regular sugar, variable cost will increase by $0.30 per box. Fixed cost will increase by $20,000 due to production and administrative changes. The sales mix is expected to be 30% normal ("Regular Sugar") biscuits milk and 70% "Low Sugar" biscuits. Calculate: (1) the weighted average contribution margin (WACM), (ii) the new breakeven point in number of boxes, and (iii) the breakdown in number of boxes per product type (4 marks) [Total: 12 marks]