Set out below are the sales and net profits of a business for two years, 2010 and 2011:
|
2010
£
|
2011
£
|
|
Sales revenue
|
530,000
|
730,000
|
|
Operating profit
|
66,000
|
114,000
|
The fixed costs in 2011 had increased by £16,000 over the previous year but the percentage contribution remained the same.
Required:
a- Calculate the sales revenue level at which the business broke even in 2011.
b- Calculate the sales revenue that would have been required to generate an operating profit of £240,000 in 2011.
c- Illustrate your answer to (b) on:
1-a chart displaying the contribution level and the profit level;
2-a profit-volume chart.
d- If a new product does not require any new fixed costs because the company utilizes the existing capacity of facilities and personnel, what would be the breakeven point?