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According to the standard answer, I got two question about item 1 and item 4. No 1, it says the investment is more sensitive to a change in sales price of 29.6% , but how this can prove it’s more sensitive? It didn’t mention the a change in sales volume so I can compare them? No 2, why the BEP sales are 100unit(70/0.7)? It was mentioned in the standard answer but I don’t know where the number 0.7 come from? Please help me sir, thanks a lot!! 🙂
If the sales volume changes the the contribution changes. So the sensitivity of the sales volume is 385/455 = 84.6%. This is more than the sensitivity of the sales price of 29.6% and so is less sensitive.
The contribution per unit is 455/650 = 0.7.
Therefore breakeven units are 70/0.7 = 100 units.
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