Jabu manufactures and sells Product X. During the most recent financial period, he sold 500 units at R750 each. There were no units of Product X in opening or closing inventory. Sales people are paid a commission of 5% on sales. The following additional information is available for this sales level:

 

Fixed administrative cost per unit                                                                 R90.00

Total fixed manufacturing overhead                                                             R120 000

Total fixed marketing cost                                                                             R50 000

Direct material price per kilogram                                                                R29.00

Total direct labour cost                                                                                 R47 500

 

Required:

1) Compile a marginal income statement to determine the break-even units and break-even value. 

2) All manufacturing cost increases with 10%. The marketing director estimates that sales volume will increase with 5% if an advertising campaign of R10 000 is undertaken. What is the operating income for Jabu?