Determine the change in profit, Financial Management

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(a) The BEQ is 200 customers per month, i.e. $3,000 / ($20 - $5)

(b) The margin of safety is 300 customers, i.e. 500 - 200

(c) Graph

(d) New break-even is 334 customers, i.e. 4,000 / ($17 - $5). This means the BEQ has increased by 67%!

(e) Graph. The MOS must be shown on the diagram for maximum marks.

(f) Explanation that this was a poor decision because the change in profit = $4,500 - $2,240 = a loss of $2,260 by reducing price.


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