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Frultd ifve (Pty) Ltd manufactures and sels a fruit drying machine. the budget fot the year is as follows: Management feels that tumover could be
Frultd ifve (Pty) Ltd manufactures and sels a fruit drying machine. the budget fot the year is as follows: Management feels that tumover could be incremed and has arked the sales manager to come up with a sugsestion. The sales manager proposed the following altemative to increase tumover Improve the quality of the product by importing the drying fluid used in the machine. This will load to an incrase in saies volume of 16% but will cause variable costs to incroase by 12%. Fixed costs will rise with 1250000 if this altemative is implemented. Benulifed a) For the ong nal budget: 1. Caiculate the contribution margin ratio. 1i. Calculate the breakmen sales in uaits and value. 14. Calculate the value of the margin of safety b) Consider whether the altemative proposed by the sales manager should be accepted. suppont your answer with mevant calculationt. SWOW AL CALCUUATONS CLEARLY. AOUND AMOUNTS TO DE NEMAST CENT AND PERCENTCES TO THE NEAALST TENTH OF A PLACLNAGL
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