Quick freezed Ltd is specialized in producing and selling fridge freezers. In 2017, the manufacturing cost per unit included:
The company produced and sold 30,000 units at £850 per unit.
In 2018, management has decided to increase the selling price by 20% and to maintain the same contribution margin ratio as last year. This increase in price is to meet an increase of £1,200,000 in fixed costs in 2018. The company has produced and sold the same quantity in 2018 as last year.
Calculate the break-even point and margin of safety in both units and revenue for the two years, 2017 and 2018, and briefly comment upon the results. (15%)
Analyze and critically evaluate the key assumptions attached to the breakeven model, within the light of the reality of today’s business environments. (15%)
Total for part B (30%)
Explain and critically evaluate:
The main sources of finance available to business and their associated costs. Ensure you evaluate the appropriateness of how the chosen sources increase the leverage (gearing) of a business. (15%)
The use of budgets as a means of planning and controlling the various business activities. (15%)
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