This question is based on Part 1 of the case study 7. Assuming that the fixed costs can be divided between sales and repairs in the proportion of their revenues and that the material cost for repairs is negligible, what is the monthly breakeven point for computers (in )?| (10 marks) CASE STUDY PART 1 When Ben is made redundant, he decides to run a business selling and repairing computers. In order to do this, he sets up a limited company, Dataloss Limited. He plans to deposit 5,000 in the company's bank account on 1 January 2021 and issue 5,000 shares, with a nominal value of 1 each, in his own name. He also plans to borrow 3,000 from his father. Ben will rent premises for his business at 2,000 a month and lease test and IT equipment for 500 a month. He will pay 3,000 for signage and furniture. For each of the first two months he will spend 7,000 on computers for resale and components for repairs. In the third month he hopes to buy 7,500 of computers on credit. At the outset, he will hire a technician, at a cost of 1,900 a month, to do the repair work, whilst he mostly deals with selling and administration. He will pay himself 800 a month in salary and plans to take further income as dividends. He estimates that he will use 250 worth of electricity per month, to be paid in April. He will pay 1,400 for 12 months' insurance. Other expenses paid for during the period will be: per month Rates Utilities (excluding electricity) Advertising Mileage 350 300 300 200 Each month he hopes to sell computers for 8,750 and charge 2,400 for repairs. At the end of 3 months he expects to have unsold inventory, which would had cost him 10,000. He will depreciate non-current assets at a rate of 20% of original cost per year Dataloss Ltd Cash Budget for the 3 months to 31 March 2021 Jan Feb Mar Total Cash in Shares Loan Sales Repairs Total 5000 3,000 8,750 2,400 19,150 8,750 2,400 11,150 8,750 2,400 11,150 5,000 3,000 26,250 7,200 41,450 2,000 2,000 6,000 500 2,000 3,000 500 7,000 1,900 800 500 7,000 1,900 800 Cash out Rent Signage and furniture Leasing of equipment Computers/components Technician Ben's salary Dividend Electricity Insurance Rates Utilities (excluding electricity) Advertising Mileage Total 1,900 800 1,650 1,500 14,000 5,700 2,400 1,650 1,400 350 350 350 1,400 1,050 900 300 300 300 300 300 300 200 900 600 200 200 17,750 13,350 8,000 39,100 2,350 Net cash in Opening balance Closing balance 1,400 0 1,400 (2,200) 1,400 (800) 3,150 (800) 2,350
