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Homework answers / question archive / Cottage Industries is a small business producing handmade baskets in rural Yorkshire
Cottage Industries is a small business producing handmade baskets in rural Yorkshire. The baskets are sold at a price of £12 each and the variable cost of producing each basket is £10. The fixed costs incurred by Cottage Industries are £400 per month. The break-even volume of production per month is:
| a. |
100 units per month |
|
| b. |
150 units per month |
|
| c. |
200 units per month |
|
| d. |
250 units per month |
In Q.1 above, Cottage Industries is planning to produce and sell 400 units. The margin of safety for Cottage Industries is:
| a. |
50% |
|
| b. |
75% |
|
| c. |
100% |
|
| d. |
25% |
In Q.1 above, if the price of a basket were to increase to £14, variable costs and fixed costs remaining the same, the break-even volume of production per month will:
| a. |
increase |
|
| b. |
decrease |
|
| c. |
stay the same |
|
| d. |
may increase or decrease |
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