QUESTION ONE

a) Peter & Sons has fixed costs of $10, 000 for the period. Their direct labour cost is $1.50 per unit and material input cost is $0.75 per unit. The selling price per unit is $4.00.

i. Calculate the Break-Even point in units. (3 marks)

ii. What does it translate to in Dollar($)? (3 marks)

b) What are the principal uses of the Break-Even analysis as a planning tool? (4 marks)

c) What are two advantages and two disadvantages of using the Break-Even analysis as a planning tool. (8 marks)

d) ...The rules of business never changed. You have fixed costs, you have variable costs, and you have profit margin. And that is it. If you don't have a handle on that stuff, then there's nothing else to talk about. If there is no profit margin, you're in trouble.

What is the connection between the above statement and the Break-Even analysis? (6 Marks)