Question Three

Your Contentment is a business that sells Wellness Packages and has the following

financial information:

The year to the 30th June 2020 2021

Wellness packages (units) 27,000 40,500

Sales $2,700,000 $4,050,000

Less: Expenses 1,350,000 1,822,500

Profit $1,350,000 $2,227,500

Chantelle, the owner, is contemplating an investment in new deluxe massage chairs

and spa baths. The combined cost will be $540,000 which will incur an annual

depreciation charge of $108,000. The investment will result in a reduction of variable

costs of $0.90 per package.

Required

a) From the two years data for 2020 and 2021 what is the break-even point in units and

sales dollars?

b) If the investment in the new equipment takes place what would the new break-even

point be in both units and sales dollars?

c) If the profit of $2,295,000 was to be maintained in 2022 and the equipment purchase

took place what would be the required level of sales in dollars and units?

Round to the nearest dollar