Flash Limited manufactures three products, X, Y and Z. 

The following budgeted information is available for March 2014. 

Fixed overheads are estimated to be $21,000 per month. 

Fixed overheads are apportioned pro rata to maximum demand. 

Required

a. Calculate the contribution per unit for each product.

b. Calculate the break-even point in units for each product.

c. Calculate the margin of safety in units for each product. 

d. Calculate the maximum profit that Flash Limited can earn in March 2014.

Due to staff holidays, only 8500 direct labour hours are going to be available in March 2014. 

e. Calculate the maximum profit for March 2014 taking account of the limited direct labour hours available. 

Break-even analysis is a useful tool for management, but it does have limitations. 

Required 

f. State four limitations of break-even analysis. 

g. Manufacturing companies may sometimes consider selling products at a price below the usual selling price. Identify four circumstances in which a company may consider this to be an acceptable practice.

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Product X Product Y Product Z $ Seling price per unit 28.00 51.50 69.00 Variable costs per unit Direct materials @ 4.40 8.80 11.00 $2.20 per kg Direct labour @ 12.00 21.00 30.00 $6 per hour Variable overheads @ $2.80 per direct 5.60 9.80 14,00 labour hour Maxmum demand (units) 1200 1500 300