Quickspray Ltd offers professional car spraying services at Suame Magazine. The company is planning its activities for the month of June 2018 for its saloon car spraying section. The company charges service fee of GH¢1,000 and incurs fixed cost (excluding fixed maintenance cost) and variable cost per unit (excluding variable maintenance cost) of GH¢35,000 and GH¢644.39 respectively for spraying of a saloon car.
The following data also relates to Quickspray Ltd on the maintenance hours of its key machine, revenue and profit for the six months ended April 2018.
Total fixed cost increases by GH¢1,120 when maintenance hours go beyond 1,400.
Required:
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Calculate for the month of May the;
i) Break-even point in units and value (4 marks)
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ii) Sales level in order to make an after-tax profit of GH¢21,150, assuming Quickspray Ltd is in the 25% tax bracket. (4 marks)
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iii) Margin of safety if the target after-tax profit of GH¢21,150 is achieved. (2 marks)
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