Camper-Quest (Pty) Ltd (Hereafter CQ) is a Namibian manufacturer of outdoor and camping equipment. Their water-proof products have taken Namibia by storm and the company has achieved significant growth in recent years. This is mainly due to a contractual agreement with all local Hike-Geek stores in Namibia to stock numerous CQ products. CQ products are all of a very high quality and are also competitively priced despite a high amount of imported products in Namibia. Expansion Opportunity Camper-Quest is considering expansion into Madagascar where there appears to be a growing demand for strong, durable tents. Explorers Union, a hiking store within Madagascar has already agreed to become the first store in Madagascar to stock CQ tents as part of their product offering. CQ has decided to only supply tents to the Madagascar market initially and will use these as a basis to assess increased product offerings in the future. A new factory will be built by CQ at a total fixed cost of N$2 million in Toamasina, one of the largest cities in Madagascar. The useful life of the factory is expected to be 25 years after which the factory will be demolished and the land restored. In addition, lease payments of N$12 500 per month must be paid for the use of the land and will remain this amount for the duration of the lease term. The company expects to make use of redundant staff members from Namibia in the new factory who would have been retrenched. These staff members will be relocated to Toamasina. Initially, the factory is expected to operate at 70 000 hours of output per month under normal conditions but under the most effective, ideal conditions will be able to operate at 80 000 hours of output per month. It takes 4 hours to produce one luxury tent (first unit) and 3.5 hours to make a single standard tent. Depreciation on machinery used in the factory will amount to N$7 000 per month and two new senior factory managers whom were recently employed within Toamasina will each earn N$300 000 per annum with an even amount payable each month. Total operating costs for the running of the factory (excluding depreciation) are expected to be N$226 900 per month when operating at normal capacity and will reach N$242 920 per month if the factory operates at 76 000 hours per month. A 2 percent commission of the selling price of both products is payable to the local government when sold as part of a contractual agreement allowing foreign investments. Standard tents will be sold for N$250 per unit and Luxury tents for N$450 per unit. The direct labour rate amounts to N$33 per hour. Additional variable manufacturing costs, including material, amounts to N$80 per Luxury tent and N$55 per Standard tent. The luxury tent is able to fit an additional person and is made with tougher material which will increase warmth, comfort and expected lifespan of the tent. Additional Information: It is expected that for the first month of sales: 12 000 standard tents and 4 000 luxury tents will be sold. Depreciation is written off on the straight-line method. No residual values are expected. Ignore all tax implications. REQUIRED: a) Calculate the break-even number of units for each product to be sold to Explorers Union in the first month of sales. Your answer should include the total sales value thereof. (15) b) Assume for this part of the question that demand for the standard tents is expected to be 13 000 units and for luxury tents 10 000 units per month: As per a contract with Explorers Union, a minimum of 12 000 standard tents must be provided per month. Assess whether factory hours are a constraint and determine the optimal production mix of standard and luxury tents. (7)