Styleshop Ltd makes and sells t-shirts. The following information is available: Budgeted sales and production volume Selling price Direct materials Direct labour Fixed costs 400 units per month 15 per t-shirt 3 per t-shirt 10 per hour 2,000 per month Each t-shirt requires 0.5 hours of direct labour time to produce. Requirements: a) Calculate the break-even point, expressed in number of t-shirts and in revenue. b) Calculate the margin of safety as a percentage of budgeted sales. (10 Marks) (10 Marks) c) Styleshop Ltd is considering investing in an advertising campaign in order to promote its t-shirts. The advertising cost would be 200 per month and it is anticipated that, as a result of the additional promotion, the sales price could be increased by 3% and sales volume would increase to 460 units per month. Prepare calculations in order to determine whether or not Styleshop Ltd should proceed with the advertising campaign. (20 Marks) d) Styleshop Ltd is considering extending its product line to include sweaters and vests. The following information is available in respect of the additional products: Selling price per unit Variable costs per unit Volume (per month) Sweaters 22 Vests 11 12 6 300 units 600 units If Styleshop Ltd produces sweaters and vests, as well as t-shirts, then the company's fixed costs will increase from 2,000 per month to 5,700 per month. Assuming that the original information holds true (i.e. ignoring the advertising campaign in part c), calculate the break-even point if the company decides to produce t-shirts, sweaters and vests. You should express the break-even point in number of units and revenue for each product line. (40 Marks) (20 Marks) e) With reference to your calculations for (a) to (d), explain the underlying assumptions of CVP analysis.