BREAKEVEN POINT

The goal of any commercial business is to maximize total revenues (TR) or reduce total costs (TC). Hence, a company's survival depends on the relationship between its TR and TC, as described in Table 1. Because these factors are interconnected, a change in anyone can affect the others. Table 1 below describes the relationship between the concepts of the average cost, marginal cost and total cost of an adult train ticket from Birmingham to London using Virgin Trains during off-peak hours. Table 1 P • Rico; q = Quantity or sates volume; TR = Total Revenue (PO; TFC = Total fixed Cost AVC = Average Variable Cost (TC/q); NC • Total Variable Cost (AVCxOJ TC • Total Cost (ATCxQ) P 0 TR AFC TFC AVC TVC TO ATC Coll 2 3-1x2 4-612 5 6 744-0 6-517 9-812 10-38 60 1000 120000 45 60 2000 120000 45 60 3000 120000 45 50 4000 120000 45 50 5000 120000 45 60 6000 120000 45 60 7000 120300 45 SO 8000 122000 45 60 9000 120300 45 60 10000 120000 45 Using the production table below, as a professional accountant, you are required to undertake the following tasks: 1) Complete the table above, fill in the blanks and advise the company at what units of production (0) the company achieves breakeven (BEP). (7.S maths) 2) Inform the company of what will be the company's profit or loss if It plans to produce only 6,000 units and what will be the profit or loss if the company sells 10,000 units? (7.5 maths). 3) As a financial analyst, which pricing strategies and non-pricing strategies would you recommend Virgin Trains to help increase revenue? Hint: this a conceptual question, calculation is not required. Higher marks will be given for rigorous answers with complete Harvard referencing. (15 marks)