Company L makes and sells a single product using a plant with a capacity of 10,000...

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Company L makes and sells a single product using a plant with a capacity of 10,000 units per month. The results for the six months ended 31 December 20X2 were as follows: £000 Sales (20,000 units) Direct materials Direct labour Production overhead (90% fixed) Selling and administration overheads (all fixed) 2,200 640 1,600 1.960 £000 6,000 6.400 (400) Loss for the period The management of Company L are planning a reduction of the selling price by £20 per unit for the six months to 30 June 20X3. Required: a. Calculate the break-even point in terms of units and sales revenue for the six months to 31 December 20X2. b. Calculate the break-even point in terms of units and sales revenue for the six months to 30 June 20X3. c. Calculate the profit for the six months to 30 June 20X3, assuming that the plant works at full capacity and can sell all it produces at the lower price. d. Calculate the profit and break-even point for the next financial year if market conditions do not allow the selling price to be increased from the new level proposed by management, but fixed costs increase by 10 per cent in total and variable costs increase by four per cent per unit. e. What are the assumptions of cost-volume-profit analysis? Company L makes and sells a single product using a plant with a capacity of 10,000 units per month. The results for the six months ended 31 December 20X2 were as follows: £000 Sales (20,000 units) Direct materials Direct labour Production overhead (90% fixed) Selling and administration overheads (all fixed) 2,200 640 1,600 1.960 £000 6,000 6.400 (400) Loss for the period The management of Company L are planning a reduction of the selling price by £20 per unit for the six months to 30 June 20X3. Required: a. Calculate the break-even point in terms of units and sales revenue for the six months to 31 December 20X2. b. Calculate the break-even point in terms of units and sales revenue for the six months to 30 June 20X3. c. Calculate the profit for the six months to 30 June 20X3, assuming that the plant works at full capacity and can sell all it produces at the lower price. d. Calculate the profit and break-even point for the next financial year if market conditions do not allow the selling price to be increased from the new level proposed by management, but fixed costs increase by 10 per cent in total and variable costs increase by four per cent per unit. e. What are the assumptions of cost-volume-profit analysis?