Question:
(a) A retail store wants to evaluate how many units it must sell in order to earn a profit of Rs 10000 per month if the price of the unit is Rs 300, the average variable cost is Rs 100, and the fixed costs are Rs 5000 per month. If the store prices the unit at Rs 350, would that make a difference? On the other hand, if the price is Rs 350 and the variable costs fall to Rs 85 would that make a difference?
(b) What do you understand by ‘Marging of Safety'?
(c) Describe how the determination of the Break Even Point can help for planning purposes.