1. The following information relates to the present position of an engineering from operating at 70% capacity level:

B.E.P in Sh. 80 million

P/V ratio 40%

Margin of safety in Sh. 20 million

The board at its las meeting have taken a decision to increase output to 98% capacity level.

Following modifications will be made:

1. Reduction in selling price by 5%
2. Increase in fixed costs by Sh.8 million (including depreciation on additions but excluding interest burden).
3. Reduction in variable costs by 5% of sales
4. Additional finance for capital expenditures and working capital Sh.20 million

Required:

1. Determine the sales to yield the existing quantum of profit plus additional profit of Sh.4 million on account of increase activity and 20% interest burden on fresh capital
2. Also determine the following;

1. B.E.P
2. P/V ratio
3. M.O.S