Sales

30,000

Less:

Production costs

Direct material

6,500

Direct labour

5,400

Production overhead variable

7,000

Prime costs

18,900

11,100

Other expenses:

Selling - Variable

2,600

- Fixed Cost

1,997

Administration

2,100

6,697

Net profit

4,403

The following changes are expected to occur during the year ending 30 September 20X2:

1.Selling price will be adjusted downward by 3% in order to attract more customers.

2.Material prices will rise by 2% due to inflation.

3.There will be a reduction in labour cost of 4%.

4.Production overheads will increase by 3%.

5.Increase in the efficiency of sales persons will reduce direct selling costs by 5%.

Required:

i)Break-even point in units and sales value(2 marks)

ii)The margin of safety in sales value (2 marks)

iii)The sales value at which profit of Sh 4.5 & 10 million will be achieved (2 marks)

A summary operating statement that shows the net profit of Sh 4.5 million in (iii) above.