Estimated units of production and sales = 3,000 units

Selling price per watch = Rs 900

Direct material per watch = Rs 270

Direct labor per watch = Rs 180

Variable manufacturing overhead cost per watch = Rs 90

Fixed manufacturing overhead cost Rs 282,000

Fixed marketing and admin cost Rs 150,000

Variable marketing and admin cost Rs 10%

1. Calculate the break even quantity

2. Calculate the target sales using marginal income ratio, if profit of R600 000 is desired

3. The sales manager made the following proposal to increase profitability ; decrease the selling price byR40per unit and increase advertising expensebyR 24000 with the expectation that sales volume will increase by10%.

Should the sales manager proposal accepted.

Motivate your answer with calculations