Breakeven Point Review Motormusic ltd makes a standard model of car radio, which it sells to car manufacturers for £60 each. Next year the business plans to make and sell 20,000 radios. The business’s costs are as follows:
Manufacturing
variable materials £20 per radio
variable labour £14 per radio
other variable costs £12 per radio
Fixed cost £80,000 per year
Administration and selling
variable £3 per radio
Fixed £60,000 per year
Required:
(a) Calculate the break-even point for next year, expressed both in quantity of radios and sales value.
(b) Calculate the margin of safety for next year, expressed both in quantity of radios and sales value.