Question:

The following data are obtained from the record of a factory:

                                                       £                   £
Sales 4,000 units @ £25 each                        100,000
Materials consumed                     40,000
Labour charges                           20,000
Variable overheads                     10,000
Fixed overheads                         18,000          88,000
Net Profit                                                         12,000

Calculate:

(i) The number of units by selling which the company will neither lose nor gain anything.

(ii) The sales needed to earn a profit of 20% on sales.

(iii) The extra units which should be sold to obtain the present profit if it is proposed to reduce the selling price by 20% and 25%.

(iv) The selling price to be fixed to bring down its break-even point to 544 units under present conditions.