QUESTION FOUR JBM Ltd can render three different types of service (Alpha, Beta and Gamma) using the same staff. Various estimates for next year have been made as follows: Service Alpha K/unit Beta K/unit Gamma K/unit Selling price 31 40 21 Variable material cost 16 19 11 Other variable costs 6 10 5 Share of fixed costs 8 12 4 Staff time required (hours) 2 3 1 Demand (units) 3,000 2,900 5,500 Fixed costs for next year are expected to total K40,000. The directors of JBM Ltd are stuck with th finance to use to finance the project. 145 Required: a) If the business were to render only service Alpha next year, how many units of the service would it need to provide in order to break even? (Assume for this part of the question that there is no effective limit to market size and staffing level.) (5 marks) b) If the business has a maximum of 10,000 staff hours next year, in which order of preference would the three services come and number of units produced for each? (7 marks) c) Discuss the relative advantages of using debt as a source of finance over equity finance. (6 marks) d) As a manager of JBM Ltd, discuss the importance of knowing the breakeven point. (7 marks)