Question

The Sherston Brick Company manufactures a standard stone block for the building industry. The production capacity for the year is 100,000 standard blocks. The selling price per block is $1.60, variable costs are $0.60 per brick and fixed costs are $60,000 per annum.

Determine:

(a) The break-even point in terms of sales revenue and output.

(b) The margin of safety if sales amount to 90,000 bricks in the year.