Question 3 (Cost-Volume-Profit Analysis / 15 marks)

Rainfall Ltd provides a single standard service. The businesss results for the past two months are as follows:

April May

Sales (units of the service) 500 620

Sales revenue ($) 25,000 31,000

Operating profit ($) 10,000 14,800

There were no changes, of any description, in selling prices or costs over the two months.

Required:

(a) What is the break-even point for the businesss activities?

(b) What benefit will it be for the management of Rainfall Ltd

(1) To carry out the analysis required in part (a) and

(2) To know the businesss break-even point?