[6] Pantheon Ltd uses 5,000 units of part AA each year. The cost of manufacturing one unit of part AA at this volume is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total 10.00 14.00 6.00 4.00 34.00 A supplier has offered to sell Pantheon Ltd unlimited quantities of part AA at a unit cost of 31.00. If Pantheon Ltd accepts this offer, it can eliminate 50% of the fixed costs assigned to part AA. Furthermore, the space devoted to the manufacture of part AA would be rented out for 24,000 per year. If Pantheon Ltd accepts the offer of the outside supplier, annual profits will: a) increase by 29,000. b) increase by 14,500. c) increase by 22,000. d) increase by 2,500. 3 Marks [7] Examples of support departments include all of the following EXCEPT: a) maintenance. b) personnel c) machining d) data processing. 1 Mark [8] Milan Cathedral Ltd has predicted the following costs for this year for 100,000 units: Variable costs Fixed costs Total Manufacturing 400,000 600,000 1,000,000 Selling and Administrative 100,000 300,000 400,000 What is the mark-up on variable costs needed to break even? a) 100% b) 40% c) 140% d) 180%