EXERCISES Homeworktut due $23$ April $2028$

$5\mathrm{.}1$ Special mail order betore oy:$00.$

Protea Ltd$\text{'}$s current activity level is $55\%.$ The operating results for the past accounting period at a capacity of $55\%$ show the following:

A mail$-$order organisation offers to purchase $20000$ units at R$3\mathrm{.}50$ each. If the order is accepted, variable administration costs will increase by only R$5000$ and packaging costs by R$6000.$

Some members of the board believe that if the selling price were reduced by $5\%$ and R$10000$ spent on advertising, the activity level would increase to $66\%.$ The precarious position of the company would then improve so that using the mail$-$order organisation's offer would not be necessary.

Required

Calculate the result of the following two alternatives and submit the matter for consideration by management:

$($a$)$ At present capacity plus mail$-$orders.

$($b$)$ At $66\%$ sapacity witheutmail$-$orderg.