Appendix 1 Break Even Questions Answer the following questions 1. The varia any, whiclh able cost of the electric kettle manufactured by Fair Oak Domestic Appliances Lid is u $210,000 after sells its kettles direct to retailers for $10, expects its net profit for the year just ended to be comp of the company is for fixed costs of $90,000. Annual sales are 60,000 ketties per year. The productive capacity wl bring about a 25 under-utilised and the marketing manager suggest that a 10 per cent reduction in selling price per cent increase in sales. (a) Define the term contribution. What is the contribution per unit in this case? (b) What level of sales is necessary to break even? (c) Calculate the sales revenue at this volume of sales (d) Calculate the sales revenue resulting from implementing the marketing managen (e) As a result of the increased volume, by how much has revenue changed? (As a result of the increased volume, by how much have costs changed? (g) Should Fair Oak reduce their selling price by 10 per cent? 2. A firm is considering which of the following three prices to charge customers A) $2.20 B) $2.00 C) $1.70 The relevant data for decision-making is: Fixed costs Variable costs Current output In table format calculate S1.2 million 125p per unit 2.6million units (a) Break even output at each price level (b) The margin of safety at each output level (c) The profit/loss at each output level (d) Draw a break-even chart to represent the data at a price of $2.20 per unit