Question
Estimated production and sales ..........3,000 units Selling price per watch ............R900 Variable manufacturing costs per watch: - Direct materials ............R270 - Direct labour ............R180 -
Estimated production and sales ..........3,000 units
Selling price per watch ............R900
Variable manufacturing costs per watch:
- Direct materials ............R270
- Direct labour ............R180
- Overheads ............R90
Fixed manufacturing overheads ............R282,000
Marketing and administrative costs:
Fixed costs ............R150,000
Variable costs ............ 10% of sales
1.1 Calculate the break-even quantity.
1.2 Calculate the target sales value using the marginal income ratio, if a profit of
R600 000 is desired.
1.3 The sales manager made the following proposal to increase profitability: Decrease the selling price by R40 per unit and increase advertising expense by R24 000 with the expectation that sales volume will increase by 10%. Should the sales manager's proposal be accepted?Motivate your answer with the relevant calculations
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