Question 2: BreakevenA firm has the following income statement for a month.Sales: 3,000 units at £80/unit £240,000Less: Cost of Goods Sold.Variable Production Cost (180,000)Fixed Production Cost (19,800)Gross Margin 40,200Selling and Administrative ExpensesVariable Selling Cost (21,000)Fixed Selling Expenses (7,500)Net Profit £ 11,700Required:1. Find the firm’s breakeven output.2. If it wishes to have a monthly net income before taxes of £18,000 and its cost structureremains as above, what quantity of output will it need to sell?3. If its variable production costs increase by £4 per unit, what will be its breakeven output?4. After the increase in costs in 3, what output will it need to sell if it wishes to have the £18,000monthly profit stated earlier?5. Given the variable production cost increase but no change in fixed costs, what will be thefirm’s monthly profit if it sells 4,000 units of output per month?
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