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The management of Bernard Ltd thinks that their new product will sell at 30 per unit. Existing capacity is fully utilised, so plant, with a

The management of Bernard Ltd thinks that their new product will sell at 30 per unit. Existing capacity is fully utilised, so plant, with a useful life of 10 years, would have to be purchased. The expected costs are as follows.

Raw material cost per unit 8
Labour cost per unit 5
Other unit variable costs 5
Fixed costs excluding depreciation 12,000
Purchase price of plant 50,000

Required:

Report the profit generated by the new product if annual sales were a) 2,000 units; b) 4,000 units.

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