1. The company Beta Corp. has the following profit & loss account.

Sales	21.500
Direct materials	10.000
Labor	3.600
Depreciation	1.000
Utilities	751
Rental cost	951
Commisions	430
Transportation cost	430
EBIT	4.338

The CEO of the company has hired you as consultant to support him in his management decisions regarding prices and volumes.

As you want to make a proper analysis so decide to make a revised income statement that employs a contribution margin format that will be useful in CVP analysis. For this purpose, you ask for additional information which is the split of the accounts:

Labor	3.600
Direct	2700
Plant manager	100
Sales & Admin	800
Control	0
Depreciation	1000
Direct machinery	700
Indirect installations	200
Office furniture	100
control	0
Utilities	751
Plant	601
Offices	150
Control	0
Rental cost	951
Office	451
Plant	500
Control	0

Additional information regarding sales is that the average price per unit for las year was 1.

1. Prepare the revised income statement and explain which of the cost lines is direct or indirect costs and why.
2. Which is the contribution margin of the company?
3. What number of units must the company sell for break-even
4. What is the sales figure that the company need to achieve if the want to have an EBIT of 5000?
5. What would be the EBIT if the company reduces salaries in 12% and increases sales in 10%?
6. The company receives a proposal of a customer that wants to buy 4000 units at a price discount of 25%.

In this case this sale would not affect our traditional customers, they would not notice. Should we accept the order if we do not have capacity constrains?

7. What are the dangers of using CVP analysis?