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