Wellington Vents Ltd operates and services snack vending machines located in restaurants, metro stations, canteens, etc. The machines are rented from the manufacturer. In addition, the company must rent the space occupied by its machines. The following expense and revenue relationships pertain to a contemplated expansion program of 20 machines.

Monthly fixed costs consist of the following:

Consider each of the following questions separately.

Required

1. Calculate the contribution margin per unit and contribution margin percentage.

2. What is the monthly breakeven point in unit sales and pounds?

3. If 20,000 units were sold, what would be the company’s net income?

4. If the space rent was doubled, what would be the monthly breakeven point in unit sales and pounds?

5. In addition to the fixed rent, if the machine manufacturer was paid £0.10 for each unit sold, what would  be the new
a. Breakeven units and breakeven revenues?
b. Operating income if 20,000 units were sold?

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Machine rent (20 units X £26.75) Space rent (20 locations X £14.40) Wages to service the additional 20 machines Other fixed costs Total fixed costs Other data: Selling price (£2.50 per unit) Cost of snack (£0.50 per unit) £ 535 288 726 41 £1,590 % of sales 100% 20%