First find the contribution per unit which is £3.00.

b) Breakeven - £57,000/£3.00 = 19,000 cans. This means when you produce 19,000 cans it will cover your fixed overheads. c) Breakeven Sales Revenue - 19,000 cans x selling price (£5.00) = Total revenue £95,000 d) Margin of Safety - Budgeted Sales - Breakeven / Budgeted Sales = 20,000 cans x £3.5 contribution per unit = £70,000 Budgeted Sales - Breakeven which is £56,000 (Fixed Costs) = £14,000 (£70,000 - £56,000) then we divide this by Budgeted Sales and we get the answer of 20% (£14,000 / £70,000 = 0.2 x 100 = 20%). This means our Margin of Safety is 20% of 20,000 cans which is 4,000 cans. e) Target Profit - Breakeven (£56,000) + Target profit (£31,500) / £3.50 contribution =25,000 cans. This means we need to sell 25,000 cans to achieve a target profit of £31,500.

Remember a company has to clear fixed overheads before they can actually make any profit.

*d - To find contribution per unit for section D you need to take Contribution per batch (£42,000) and divide by units per batch (12,000).

Oh I see, so you have to find the variable first then divide it by the units in the batch to get the contribution per unit. Makes sense, thank you so much!

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