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 usage per product 2 kg

Direct material price per kilogram R14.50

Total direct labour cost R47 500

Required:

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

(a) Calculate total sales

(b) Calculate total variable cost

(c) Calculate total fixed cost

(d) Calculate net profit

(e) Calculate breakeven sales units

(f) What is the margin of safety ratio?

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?

(a) Calculate total sales

(b) Calculate total variable cost

(c) Calculate total fixed cost

(d) Calculate net profit

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?

Refer to above. Do you think that it is viable for Jabu to launch the advertising campaign?

(a) Calculate increase in total contribution

(b) Calculate increase in sales units

(c) Calculate increase or decrease in total fixed cost

(d) Calculate increase or decrease in operating income

(e) Refer to above. Do you think that it is viable for Jabu to launch the advertising campaign?