Ba-Gode sales Nsima with Mbuzi at the Lusaka number one most famous eating place Matebeto were most people go to enjoy Nsima with a wide range of all native Zambian relish. Like most small business Ba-Gode, does not have a management accounting especially planning and budgeting. Competition is very fierce and you Palibe Kanthu you are a regular customer for eating nsima with mbuzi and you have been engaged Ba-Gode on a number of issues that he may consider in order to gain completive advantage. You have spoken to him on the concept of cost volume profit analysis and variance analysis not forgetting the need for his entity to keep production overheads low.

Ba-Gode has told you that his average selling price per plate of nsima is ZMW50 and 45% of the selling price is makes up direct costs. Every plate of nsima is comes with a 300mls glass of well fermented Zambian munkoyo which customers get for free as part African desert. This munkoyo is outsourced from Bana dyululu and she sells ZMW5 per every 300mls glass she suppliers Ba-Gode sold. He also pays a rental ZMW2,430.00 per month for the cooking utensils. The monthly rental cost for the place is ZMW 4,500 but he also pays to the Lusaka City Council a levy of ZMW1,200 per annum. He also pays Nyuma Ngoma a very beautiful cashier lady an annual salary of ZMW42,000.00. Ba-Gode has a monthly average daily demand of 45 plates sold. He opens at 09:00 am and closes at 17:00 pm (8 hours)

For the purpose of this question, today is 1st September 2020 and consider an average business month of 30 days for all the 12 months.

Required

1. How many plates he needs to sale for him to recover all the period and unavoidable costs and advise Ba-Gode the date and estimated time on which he will neither make a loss nor a profit. (2 marks)
2. Advise Ba-Gode the monthly margin of safety both in form of number of plates and interpret both results. (2 marks)
3. Calculate the current month contribution ratio per plate and monthly profit.

(4 marks)

4. Ba-Gode is planning to increase the monthly absolute contribution per plate by 10% in the next financial year, monthly fixed costs will go up by 8%. He also plans to begin monitor at the fixed costs closely and you have advised him that he may either Activity Based Costing (ABC) or Absorption Costing.
   1. Advise Ba-Gode what he must do to the cost elements in order to archive the 10% increase in the contribution per plate.

(5 marks)

2. How may plates of Nsima (Ugali) should he sell in order for him to archive 20% increase in the annual profit for the next financial year under the new cost structure. (4 marks)
3. Using facts in the case in question advise Ba-Gode which production overheads method will be more suitable for his business

(6 marks