Reference no: EM13500792

The income statement for Menage Industries for 2011 is as follows.
Menage Industries Income Statement for Year Ended 31 December2011

Sales revenue (200 000 units) $2000000
Cost ofgoods sold 1200000
Gross profit 800000

Less expenses
Marketing and distribution $460000
Administration 440000
900000

Profit (loss) $(100000)

All ofthe costs ofgoods sold are variable, 50 pereent ofthe marketing and distribution costs are variable, and 40 percent ofthe administration costs are variable.

REQUIRED

Calculate the number of units required tobreak even. The finance manager has devised a number of alternative plans to get the entity back into profitability. One ofthe plans relates to switching to a more reliable supplier ofraw materials, which will increase the cost ofsales per unit by$0.80. A change in marketing strategy will see variable marketing and distribution costs increase by $0.10, and fixed marketing and distribution costs decrease by$60 000. Competitive forces would allow an increase in the selling price ofonly $0.50per unit. On the infonnation available, ",'would you advise switching to this alternative plan?