Reference no: EM132633214

Fitzgerald Limited produces and sells a single product. Budgeted results for that product, for the year ended 31 December 2012, are shown below:

Budgeted sales 10,000 units

                                 £                       £

Sales                                       2,000,000

Direct Materials        800,000

Direct Labour          400,000

Fixed Overheads   500,000

Total costs                                 1,700,000

Total Profit                                  300,000

Problem a) Produce a profit statement for the year ending 31 December 2012, assuming actual sales are 12,000 units.

Problem b) Calculate the break-even point for the year ending 31 December 2012 and the margin of safety expressed as a percentage of the original budgeted sales.

Problem c) Calculate the revised break even point if a new wage settlement increases direct labour costs by 20%.

Problem d) Assuming sales of 10,000 units are achieved, and the new wage settlement is never agreed, calculate the selling price per unit that would earn a total profit of £500,000.

Problem e) Discuss the limitations of break even analysis