D)

New fixed cost (marketing and advertising) = £45,000

So new total fixed cost = (£106,600 + £45,000) = £ 151,600
The selling price increased by 9%,
New selling price = £14.17
Increase in sale by 17%,
New sale units = 48,000 ×117% = 56,160 units
So the new profit will be-

Pound Pound

Selling price 795787

Deduct: Variable cost (564408)

(56160*10.05)

Contribution margin: 231379

Deduct: Fixed cost (151600)

Profit: 79779

This strategy will be a good strategy in terms of profit as the total profit will be
increased.

A)
Contribution margin is the difference between per unit selling price and per
unit variable cost of a product.
The contribution for each electric kettle,
Here,
Per unit selling price = £13
Per unit total variable cost = (Materials + Labour A Variable overheads)
=(£5.25 + £2.95 + £ 1.85)
= £ 10.05
Contribution margin= Per unit selling price - Per unit variable cost
= £13- £ 10.05
= £2.95.
Contribution for each electric kettle = £ 2.95.

C)

Baraka Ltd will make profit if it produces and sells 48,000 electric kettles at
£13 per kettle;
Here,
Total unit = 48,000 units
Selling price per unit = £13
Total selling price of 48,000 kettles = (48,000 × £13) = £624,000
Fixed cost = £106,600
Variable cost per unit = £ 10.05
Total Variable cost for 48,000 kettles= (48,000 × £ 10.05) = £ 482400

Pound Pound

Selling price 624,000

Deduct: Variable cost (482,400)

Contribution margin: 141,600

Deduct: Fixed cost (106,600)

Profit: 35000
B)
Break-even point is the point at which total expenses and total revenues are
equal and there is no net loss or gain, and at this point, though opportunity
costs have been paid and capital has received the risk-adjusted, expected
return.
Break-even point for each electric kettle in terms of both units and revenue are
calculated below;
Here,
Fixed cost = (Production + Selling)
= (£59,000+ £47,600)
= £106,600
Contribution margin ratio= Contribution margin/ selling price
= 2.95/13
= 22.69231%
Break-even point (units) = £106,600/ £2.95
= 36,135 units (approximate)
Break-even point (revenue)= £106,600/ 22.69231%
= £469763 (approximate)