Two companies Martin and Kelly manufacture the similar hand-sanitizing products. The following data for the two companies for the year 2020 are provided below:

Martin ($)

Kelly ($)

Sales revenue

120,000

144,000

Total costs

84,000

96,000

Variable Costs

40 % of sales revenue

50%

Required:

1-Calculate the Break Even Point (BEP) in dollars of product for each company. (8 Marks)

2-Calculate the percentage margin of safety for each company. (8 Marks)

3-If sales of the product in Martin company are equal to 5,400 units, determine the BEP (in units), and present the Break-even chart. (8 marks)

4-In 2020, company Martin plans to increase the variable cost by $2 while the fixed cost and the selling price will remain constant. Calculate the number of units to be sold in order to earn the same profit as Kelly in 2020. (6 Marks)

5-Based on your answers to parts 1 and 2, Discuss which company has a safer financial position, and why. (5 Marks)