Question
An entrepreneur recently opened a filling station. Diesel is sold at R15 per liter and the variable costs total R12 per liter. The fixed costs
An entrepreneur recently opened a filling station. Diesel is sold at R15 per liter and the variable costs total R12 per liter. The fixed costs per month are R270 000. After six months of trading, the sales achieved were 1080 000 liters and the sales volume has remained at the same level each month. Proposal 3 The possibility of only operating from 06:00 to 20:00 is being considered. This earlier closing time is expected to result in a loss in sales of 25 000 litres on average per month. It is hoped that the saving in fixed costs resulting from the reduction in operating hours will enable the entrepreneur to achieve an average monthly profit of at least R300 000. Calculate the reduction in monthly fixed costs that is necessary to yield a profit of R300000, if Proposal 3 is accepted. (5 marks)
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