MZANZI Company Ltd manufactures and sells a telephone answering machine. The company's contribution format income statement for the most recent year is given below:

Total Per Unit % sales

Sales (units = 50000) R3,000,000 R60 100

Less variable expenses R2,250,000 R45 ?

Contribution margin R 750,000 R15 ?

Less fixed expenses R 500,000

Net income R 250,000

Management is anxious to improve the company's profit performance and has asked for several items of information.

Required:

2.1 Compute the company's contribution margin ratio and variable expense ratio.

2.2 Compute the break-even point in both units and rands.

2.3 Assume that sales increase by R1,250,000 next year. If cost behaviour patterns remain unchanged, by how much will the company's net income increase?

2.4 Refer to the original data. Assume that next year management wants the company to earn a minimum profit of R200,000. How many units will have to be sold to meet this target profit?

2.5 Calculate the margin of safety ratio.