BAX Plc. produces and sells a specialised computer software programs. Estimated unit data for next year are as follows: Per unit £ £ Selling price 600 Variable costs: Labour 200 Materials 40 Variable overheads. 10 250 Profit 350 Anticipated fixed costs for the year are £80,000 for administration and £60,000 for selling and distribution. Estimated sales for the year are 640 computer soft wares. You have been recently hired as graduate business analyst and for business decision-making purposes in BAX Plc. You are tasked to: a) Determine. i) Breakeven point in terms of number of software programs sold. ii) The margin of safety as a percentage of estimated sales. b) The company’s target profit for the year is £56000. i) Discuss whether the estimated sales volume will be sufficient to achieve this target.
BAX Plc. produces and sells a specialised computer software programs. Estimated unit data for next year are as follows:
Per unit £ £
Selling price 600
Variable costs:
Labour 200
Materials 40
Variable
Profit 350
Anticipated fixed costs for the year are £80,000 for administration and £60,000 for selling and distribution. Estimated sales for the year are 640 computer soft wares.
You have been recently hired as graduate business analyst and for business decision-making purposes in BAX Plc. You are tasked to:
a) Determine.
i) Breakeven point in terms of number of software programs sold.
ii) The margin of safety as a percentage of estimated sales.
b) The company’s target profit for the year is £56000.
i) Discuss whether the estimated sales volume will be sufficient to achieve this target.
ii) Evaluate the estimated sales volume that will neither cause profit to exceed nor fall short of the target profit.
c) Prepare a breakeven chart for BAX Plc, showing clearly, the breakeven point, and the margin of safety
(e) Critically analyse the benefits and limitations of the breakeven model, its application in marginal costing and as a business strategy for BAX Plc.
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