a) The profit or loss at each of the four levels of projected demand

 In this question the approach to take is to layout a profit statement at the four levels of demand and input the fixed and variable cost information given in the data. From this one can see that the calculation of sales is vital to answering the question. One can calculate sales at each level from using the C/S ratio of 60%. If the C/S = 60% that implies sales = 100% and variable costs = 40%. Thus sales is calculated by dividing the variable costs at each level by 40% and multiplying by 100%. For example sales under the adverse demand level is calculated as €30,000 x 100/40 = €75,000

                                                              Profit statement

b) The break-even point in sales value

As there is no unit information given in this question the break-even point must be calculated by using the contribution to sales ratio which calculates the break-even point in euro sales.

 Fixed costs                 46,000       =     €76,667

C/S ratio                       0.60

c) The level of sales required for the business to make a return on an initial investment of 20 per cent

As there is no unit information given in this question the sales to make a required profit must be calculated by using the contribution to sales ratio which calculates this in euro sales. The required profit is €100,000 (20% x 500,000).

Fixed costs + required profit                46,000 +  100,000     =     €243,333

      C/S ratio                                                       0.60

d) Briefly comment on the viability of the venture

In this new venture according to the projected data the risk of failure seems quite low in the first year. However it does not seem likely that the project will achieve returns of 20%, at least not in its first year. Thus overall the project looks to be a safe one capable of achieving reasonable returns. It must be noted that this opinion is based on the accuracy of the research data which may be flawed.