Question

Use the information given below to answer the following questions independently:

     3.1 How many units must be sold in order to break even                                           (4)

     3.2 Calculate the margin of safety as a percentage.                                                    (4)

3.3 Determine the sales quantity required in order to achieve the company’s profit

           objective of R1 800 000.                                                                                          (4)

3.4 Calculate the total Contribution Margin and Net Profit/Loss, if the sales volume is

              5% less than expected.                                                                                            (4)

3.5 Suppose the marketing manager proposes that the selling price be increased to   R198 per unit. Calculate the amount by which fixed costs must decrease in order to achieve the company’s profit objective of R1 800 000, if 50 000 units are sold.    (4)                    

            INFORMATION

Agta Enterprises manufactures a product that sells for R180 each. The company presently produces and sells 50 000 units per year. Unit variable manufacturing and selling expenses are R90 and R18 respectively. Annual fixed costs are R2 200 000 for manufacturing overheads and

R1 040 000 for selling and administrative activities.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and format. For detailed answer refer to the supporting sheet.