Question

Lannion and Co. is engaged in providing and marketing a standard advice service. Summarised
results for the past two months reveal the following:

October November
Sales (units of the service) 200 300
Sales revenue (£) 5,000 7,500
Operating profit (£) 1,000 2,200
There were no price changes of any description during these two months.
Required:
(a) Deduce the BEP (in units of the service) for Lannion and Co.
(b) State why the business might find it useful to know its BEP.

Answer 1

(0) Variable cost per unit of the service Diffurcace in sales sevente Difference in operating profil Difference in units of the service (1.50D - 5.000) (2.200 - 1000) 300 - 200 2500 - 1,200 100 £ 13 pes unit of the service Selling price pes unit of the Service 5000 २०० of 25 per unit of service Contribution margio per unit of Service Vasiable cost Selling price 25 13 f 12 per unit of service

Total Contribution Maxgio (October] 200 x 12 £2,400 fixed costs Operating profit Total contribution margin . 2,400 1000 at 1,400 BEP (in units of the service) = fixed costs Contaibution margio per unit of service ܩܩܛܨܠ 12 116.67 119 units of service 22 ist (b) in BEP helps the business determine the number of units that must be sold in order to cover the cost od make a profit, helps the business in deciding selling prices, Setting 'sales budgets_and preparing a business plas. It helps the company business) to decide the least number of sales required to make profits. inst helps the business Monitors and controls fixed and variable cost