Aero Ltd manufactures and sells a range of outdoor activities and camping equipment. The company has recently produced and marketed a new product called EcoTent. The plant’s production capacity is...

Aero Ltd manufactures and sells a range of outdoor activities and camping equipment. The company has recently produced and marketed a new product called EcoTent. The plant’s production capacity is 8,000 units on a monthly basis. Manufacturing variable costs (manufacturing and selling) amount to £12.50 per unit. EcoTent related fixed costs would total £65,000 per month.

Predicted monthly demand for EcoTent is expected to exceed 8,000 units. Additional plant space would need to be rented. This would incur a fixed cost of £2,200 on a monthly basis. Variable costs of £14 per unit for the production of EcoTent would be incurred in the rented plant facility.

Aero Ltd plans to sell EcoTent at £20 per unit.

1. c) The company is also considering the implementation of a new reward scheme in which sales managers would receive a bonus of £0.50 for each unit sold in excess of the break-even point. How many units would be required to sell (monthly) to obtain a rate of return of 25% on the monthly investment (additional plant space requires additional fixed costs on a monthly basis) in fixed costs?


2. d) Identify and discuss five assumptions of break-even analysis