Question - Mrs Mac sells burgers and is considering whether to open a second outlet. The burgers have a single selling price and identical costs, regardless of where they are produced.

The following data is supplied:

Variable data per burger:

Selling Price                             $6.00

Purchase Costs                         $3.90

Selling & Promotional Costs        $0.30

Annual Fixed Costs:

Rent                                        $60,000

Salaries                                   $200,000

Other                                      $100,000

Required:  

(a) Calculate the annual break even point in unit sales.

(b) If 220,000 burgers were sold, calculate the profit or loss.

(c) Calculate how many burgers must be sold to achieve a target profit before tax of $167,940.

(d) Calculate how many burgers need to be sold to achieve an after tax profit of $126,000 if the tax rate is 30%.

(e) If the selling costs are $0.60 per unit, calculate the annual break even point in dollar sales.

(f) If the budget is to sell 300,000 burgers, what is the Margin of Safety?

(g) List two assumptions which need to be considered regarding Cost volume profit analysis.