Table Talk makes and sells dining tables but is considering producing matching chairs as well. Although the tables and the chairs could still be sold separately, the company expects to sell them together as one table and six chairs. Details of the products are as follows: Table Chair £ £ Selling price 340 60 Variable costs 100 30 Budgeted sales (units) 3,000 18,000
Table Talk
Table Talk makes and sells dining tables but is considering producing matching chairs as well. Although the tables and the chairs could still be sold separately, the company expects to sell them together as one table and six chairs.
Details of the products are as follows:
|
|
Table |
Chair |
|
|
£ |
£ |
|
Selling price |
340 |
60 |
|
Variable costs |
100 |
30 |
|
|
|
|
|
Budgeted sales (units) |
3,000 |
18,000 |
Fixed costs total £480,000 per annum.
Calculate the break-even level in units and the margin of safety if the company continues to make and sell only tables.
Calculate the break-even level if the company introduces chairs and sells the two products in the expected ratio, both in total number of products and split by product line; determine the margin of safety. Comment on the results compared with only selling tables.
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