Great (Pty) Ltd started off producing a single product, called A. Price and cost details per unit are:

		R
Selling Price		R275
Direct Material	5kgs at R20/kg	R100
Direct Labour	4 hours at R25/hr	R100
Manufacturing Overhead		R70
Net Profit		R5

Product A, requires 10 hours of machine time. Actual manufacturing overheads are incurred according to the following cost volume relationship:

Overheads	R325 000	R700 000
Machine Hours	25 000	100 000

GREAT breakeven point in units is: 2000000/r25

GREAT break-even value is: R200000/9.090909% = R2 200000

GREAT margin of safety % assuming they sell 12000 units is 33.33%

QUESTION1:

The production overheads behaviour us best described as

• Semi-fixed
• Mixed
• Semi-variable
• Can be either mixed or semi-variable as they mean the same

QUESTION 2:.

GREAT product cost according to variable costing principles is:

• Prime cost of R200
• Full manufacturing cost of R270
• Prime cost plus variable manufacturing overhead per unit = R250

QUESTION:

The PV Ratio is calculated as follows:

• R25/R275 =9.090909%
• R250/R275= 90.09%
• R275/R5 = 55:1
• R275/R25 = 11:1
• R5/R275 = 1.82%