Solve the Following:

The selling price per each telephone is 1,800

Purchase cost per each telephone 1,500

Variable commission paid for each telephone 75

Monthly fixed expenses: Rent 70,000

Others 20,000

a) Compute the monthly break-even sales volume in units.

b) Compute the margin of safety in sales revenue if the current monthly sales volume is 450 units.

c) Compute the sales volume required in units if the monthly target profit is increased to HK$36,000.

d) Recently the landlord proposed to provide additional space by letting the shop premises next to Manhattan Limited. Under the proposal, monthly rent will be increased by HK$28,000. With a larger shop area, the directors expect the monthly sales volume to increase by 120 units. Advise whether the proposal is acceptable.

Answer rating: 100% (QA)

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