Break-even analysis – Worksheet 29: Meru Limited

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Topics covered: Break even analysis
  • Break even quantity
  • Break even revenue
  • Margin of safety
  • Profit

You are given the following cost and revenue details

  Business A Business B
Fixed cost $ 20 000 p.a. $ 40 000 p.a.
Variable cost $120 per unit $ 60 per unit
Selling price $ 200 per unit $ 100 per unit
Current output (Annual) 400 units 1200 units

 

Questions:

  1. Identify five assumptions of break even graph [ 2 marks]
  2. Calculate unit contribution for both Business A and Business B [ 2 marks]
  3. Calculate break even quantity for both Business A and Business B [ 4 marks]
  4. Calculate break even revenue ($) for both Business A and Business B [ 4 marks]
  5. Calculate margin of safety (units) for both Business A and Business B [ 2 marks]
  6. Calculate profit at the current level of output for both Business A and Business B [ 4 marks]
  7. Calculate the number of units to be sold to make 20 % more profit from the current level of profit [ 6 marks]
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