The following was extracted from the standard cost card of Kafue Cement plc.

Selling price 100kg pocket of cement K360

Direct material cost per 100kg pocket of cement K50

Direct labour cost per 100kg pocket of cement K50

Variable production overhead per 100kg pocket of cement K29

Other relevant cost information extracted from the budgets:

Fixed production costs K9,750,000

Fixed selling and distribution costsK3,456,000

Sales commission 5% of selling price

Sales 90,000 100kg pockets of cement.

REQUIRED:

1. Calculate the breakeven point both in sales volumes (number of pockets) and sales value.

2. Calculate the margin of safety both in percentage and in volume.

3. Suppose the selling price per pocket of cement was to be increased to K375 and the sales commission increased to 8% and a further K150,000 on advertising.

Calculate the revised breakeven point sales volume based on suggestion in (3) above and comment accordingly.