1. Tebogo Ltd Manufactures and markets floaters which they sell for R20 per pack. Current output is R40 000 packs per month which represents 80% of capacity. they have the opportunity to utilise their surplus capacity by selling the product at R13 per pack to a sports chain store who will sell it as their brand product. Total costs for the last month were R560 000 of which R160 000 were fixed costs . This represented a total cost of R14 per pack.

Required

Should Tebogo Ltd accept the Sports store order? Provide detailed calculations in support of your answer.

2. The following is Kamogelo manufacturing Company 's contribution format income statement for last month:

Sales R1 200 000

Variable expenses 800 000

Contribution margin 400 000

Fixed expenses 300 000

Net operating Income R 100 000

The company has no beginning or ending inventories and produced and sold 20,000 units during the month.

Required:

a. What is the company's contribution margin ratio?

b. What is the company's break-even in units?

c. If sales increase by 100 units, by how much should net operating income increase?

d. How many units would the company have to sell to attain a target profit of R125,000?

e. What is the company's margin of safety in Rands?

f. What is the company's degree of operating leverage?