C Answer 1 question from this section. All questions carry the same mark. Total in this section is 30 Marks. Question 12 MDG Ltd makes a standard model of headsets, which it sells to retailers for 60 each. Next year the business plans to make and sell 20,000 headsets. The business's costs are as follows: Manufacturing Variable materials 20 per headset Variable labour 14 per headset Other variable costs 12 per headset Fixed cost 80,000 per year Administration and selling Variable Fixed 3 per headset 60,000 per year The management of MDG Ltd has little knowledge about management accounting and Required: a) What is meant by the Break-even point (BEP) for an activity? How is it calculated? Explain why MDG Ltd should know the BEP. (8 marks) b) Calculate the BEP for next year, expressed both in quantity of headsets and sales value. (6 marks) c) Calculate the level of activity (headsets) that is required to generate a profit of 40,000. (5 marks) d) Calculate the margin of safety for next year, expressed both in quantity of headsets and sales value. (5 marks) e) Compare and contrast the incremental budgetary approach to the zero-base budgeting approach to budgeting. (6 marks) (Total: 30 marks) Birkbeck College 2021/22 Page 9 of 12