MANUFACTURING ENTERPRISES: COST CALCULATIONS (16 marks)

Evana May has a small business called Keke Rocking Chairs, that manufactures rocking chairs. She decided on a selling price of R800 each and wants your advice on certain issues.

INSTRUCTION

The information for the month of June 2021 is provided. Use the information to answer the following questions:

1)How many chairs must be manufactured and sold to break even? Show the relevant calculation. (12)

2) Comment on her decision to sell the chairs for R800 each delivery included. Up to date she has an order for 90 rocking chairs. Do you think the selling price is

appropriate? Give ONE reason for your answer. (4)

INFORMATION

1.	Expenses:
Wood per chair		R130
Varnish per chair		R25
Screws and nails per chair		R18
Direct labour per chair		R50
Factory foreman: salary		R12 000
Factory rent		R18 000
Factory insurance		R1 200
Admin cost		R2 800
Distribution cost per chair`		R75

[20]

Please provide step by step calculations and explanations.