Q3: CVP Analysis + Costing Methods [15 Marks]

Strong Currentis a one product business and manufactures board shorts. They operate out of rented premises in Byron Bay, where the factory is split into a manufacturing and storage area and a retail space.

You, as the management accountant for the firm, have been asked to prepare CVP analysis using the following information from the previous financial year.

Required:

1. Calculate how many board shorts Strong Currentneeds to sell to break even. [5 marks]

1. If Strong Currents sold 3 000 boards what would this indicate about their margin of safety?

[5 marks]