BSB Uniform store is producing a new Varsity Jacket for the sixth form pupils. The store...
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BSB Uniform store is producing a new Varsity Jacket for the sixth form pupils. The store has predicted its annual fixed costs will be £100,000. It plans to sell the jacket at £50 each and estimates the variable cost of producing a single jacket will be £30. They can make 7,500 jackets but forecast that demand will be 6,000 in the first year. a) Calculate the contribution per unit. b) Produce a break-even chart. c) Identify the break-even point on the chart. d) Calculate the margin of safety if demand is at full capacity. The proprietor decides to change the selling price to £45 to help attract customers. a) Calculate the new contribution per unit. b) Draw a new total revenue line on the break-even chart. c) Calculate the new break-even point using the formula. d) Comment on what has happened to the break-even point. e) Calculate the new margin of safety if demand is at full capacity. Answer the following: • Using the break-even chart identify the level of risks that the business is prone to face at the start-up of the business. Explain how this can impact the business risks. In your conclusion state a broad range of actions that the business could take to address these risks, based on the analysis of your calculations BSB Uniform store is producing a new Varsity Jacket for the sixth form pupils. The store has predicted its annual fixed costs will be £100,000. It plans to sell the jacket at £50 each and estimates the variable cost of producing a single jacket will be £30. They can make 7,500 jackets but forecast that demand will be 6,000 in the first year. a) Calculate the contribution per unit. b) Produce a break-even chart. c) Identify the break-even point on the chart. d) Calculate the margin of safety if demand is at full capacity. The proprietor decides to change the selling price to £45 to help attract customers. a) Calculate the new contribution per unit. b) Draw a new total revenue line on the break-even chart. c) Calculate the new break-even point using the formula. d) Comment on what has happened to the break-even point. e) Calculate the new margin of safety if demand is at full capacity. Answer the following: • Using the break-even chart identify the level of risks that the business is prone to face at the start-up of the business. Explain how this can impact the business risks. In your conclusion state a broad range of actions that the business could take to address these risks, based on the analysis of your calculations
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Cost Management Measuring Monitoring and Motivating Performance
ISBN: 978-0470769423
2nd Canadian edition
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang-Hsuan Chen, Gail Cook
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