Question 1

Beyonca Ltd is a small manufacturing business which processes and sells a special type of herbal tea to distributors as well as retail outlets.

Below are current selling prices and variable costs per kg, as well as fixed costs for the current period.

Selling price	6.60
Variable
Tea leaves	1.4
Processing	0.6
Packaging	0.55
Distribution	0.2
Fixed
Retailers shelving fee	60,000
Production Equipment	15,000
Promotional costs	80,000

To boost profits for the future period, a marketing plan has been completed which involves spending 15,000 more on advertising and raising the selling price by 5%. It has been estimated that variable costs will need to increase to 3 per kg because of production and sales output increasing from 90,000 kg to 105,000 kg. To increase productive capacity, a one-off cost of 22,000 will be incurred.

• a.Calculate the current break-even point, both in units and sales revenue.