Question: QUESTION 5 (25 marks) James Ltd. has the following information available for this year: September October Total costs 86,000 146,000 Budgeted sales (units) 15,000

QUESTION 5 (25 marks) James Ltd. has the following information available for

QUESTION 5 (25 marks) James Ltd. has the following information available for this year: September October Total costs 86,000 146,000 Budgeted sales (units) 15,000 30,000 The selling price is 12 per unit. *Page 4 of 7 a) What is James Ltd.'s margin of safety in units for September? (7 marks) b) If next year, fixed cost rise by 12%, variable costs fall by 4% and the BEP remains the same as the current year, how much must the selling price be? (4 marks) c) Explain why the accountant's view of breakeven is often criticised. (9 marks) d) Discuss how operational gearing affects a company's profits and give an example of how it can be increased. (5 marks)

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