A company makes and sells a single product. The selling price is £12 per unit. The variable cost of making and selling the product is £9 per unit and fixed costs per month are £240,000. The company budgets to sell 90,000 units of the product a month.

Required

a) What is the budgeted profit per month and what is the breakeven point in sales?

b) What is the margin of safety?

c) What must sales to achieve a company profit of £120,000?

d) Briefly explain the limitations of break-even analysis.

Answer rating: 100% (QA)

a To calculate the budgeted profit per month we need to subtract the total costs from the total revenue Total revenue Selling price per unit Budgeted sales volume 12 90000 units 1080000 Total variable ... View the full answer