$3\mathrm{.}1$

REQUIRED

Study the information provided below and answer the following questions:

$3\mathrm{.}1\mathrm{.}1$ If the sales manager$$s proposal is rejected, calculate the total revenues at break$-$even by using the

contribution margin ratio. $(4$ marks$)$

$3\mathrm{.}1\mathrm{.}2$ Calculate the additional expenditure that the company can afford to spend on advertising, in keeping with

the sales manager$$s proposal. $(4$ marks$)$

$3\mathrm{.}1\mathrm{.}3$ Calculate the break$-$even quantity if the sales manager$$s proposal is accepted $($using the proposed new

selling price and the increase in the advertising outlay$).(4$ marks$)$

INFORMATION

Denel Enterprises manufactures a product that sells for R$180$ each. The company presently produces and sells

$120000$ units per year. Unit variable manufacturing expenses and variable selling expenses are R$90$ and $10\%$

of the sales price respectively. Fixed costs are R$4536000$ for manufacturing overheads and R$1944000$ for

selling and administrative activities. The sales manager has proposed that the price be increased to R$216$ per

unit. To maintain the present sales volume, advertising must be increased. The company$$s profit objective is

$10\%$ of sales.