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SECTION A Answer both questions in this Section Question one XYZ Ltd makes one product...

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SECTION A Answer both questions in this Section Question one XYZ Ltd makes one product which it sells for K600 per unit, The analysis of its costs has revealed the following: The company is about to start budgeting for the forthcoming period and wishes to establish the level at which it should operate in order to ensure that enough profits are earned for its shareholders to receive an attractive dividend. In this regard it wants to know the breakeven point, the level at which it should operate to earn profits of K100 million and above and the margin of safety of 40%. Required (a) Calculate the breakeven point in units and in Kwacha. (b) How many units must be produced to earn a profit of (i) K100 million? (ii) K250 million? (c) How many units of production ensure a margin of safety of 40% ? (d) What will happen to profit if the company decides to operate at 1,500,000 units and fixed costs rise by 20% ? (25 marks)

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