Draw a contribution break-even chart and identify the monthly break-even sales value and area of contribution

SECTION B

Z plc operates a single retail outlet selling direct to the public. Profit statements for August and September are as follows:

August September

Sales 80,000 90,000

Cost of Sales 50,000 55,000 Gross Profit 30,000 35,000

Less:

Selling and distribution 8,000 9,000

Administration 15,000 15,000

Net Profit 7,000 11,000

REQUIRED:

(a) Use the high- and low-points technique to identify the behaviour of:

(i) Cost of sales;

(ii) Selling and distribution costs; (iii) Administration costs.

[4 marks]

(b) Draw a contribution break-even chart and identify the monthly break-even sales

value and area of contribution. [10 marks]

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