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Hello, I hope this is brain freeze but how is the new contribution being calculated in Q 1 part (ii). I can understand the calculation of loss of operating profit and he break even anlysis.
My calculations are:
Current cost = $21 x 2m = 42m
Variable costs increase by 10% to 46.2Costs/unit = 46.2/2 = 23.1
Contribution = 75 – 23.1 = 51.9
Marketing and audit costs are fixed, so don’t affect the contribution per unit, but these costs do have to be covered in the break-even analysis.
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