Woolco is a company which manufactures jumpers. In the past few years, the company has experienced declining profits The CEO has called for a review to determine whether the jumpers are profitable. The most recent financial results are presented below:

Required:

Calculate the number of units required for the company to breakeven

Calculate the margin of safety.

How are the break even units related to margin of safety units?

What is the contribution margin ratio

If labour is a scarce resource for Tweed Company how might the business maximise its profits?

Part B

In a strategy meeting, the manufacturing director said, If we raise the price of our product, the companys break-even point will be lower. The financial director responded by saying, Then we should raise our price. The company will be less likely to incur a loss. Do you agree with the manufacturing director? Give reasons. Do you agree with the financial director? Explain your answer.

Sales revenue (90,000 units) 900,000 Manufacturing Cost of Goods Sold Direct Direct Variable factory 100,000 350,000 60,000 20,000 commissions(constant per unit sold) Variable Delivery costs (constant per unit sold) 55,000 585,000 Fixed costs Profit 270,000 45,000