A summary of a manufacturing company’s budgeted profit statement for its next financial year, when it expects to be operating at 75 per cent of capacity, is given below.

	£	£
Sales 9,000 units at £32		288,000
Less:
direct materials	54,000
direct wages	72,000
production overhead – fixed	42,000
– variable	18,000
		186,000
Gross profit		102,000
Less: admin., selling and dist’n costs:
– fixed	36,000
– varying with sales volume	27,000
		63,000
Net profit		39,000

It has been estimated that:

(i) if the selling price per unit were reduced to £28, the increased demand would utilize 90 per cent of the company’s capacity without any additional advertising expenditure;

(ii) to attract sufficient demand to utilize full capacity would require a 15 per cent reduction in the current selling price and a £5,000 special advertising campaign.

You are required to :

(a) calculate the breakeven point in units, based on the original budget;

(b) calculate the profits and breakeven points which would result from each of the two alternatives and compare them with the original budget.