One of Power South Africa Limited$$s divisions is busy determining its profitability. The business sells components. During the month of July $2024,$ it sold $1000$ items at a price of R$2000\mathrm{.}00$ per component. Therefore, Sales were R$2000000$ for the month. Each item costs R$1500$ to sell.

If we assume that the business unit has monthly expenses of R$450,000,$ then we can work out the monthly net profit and represent it in the following form:

Income statement for the month of July $2024$

Sales $(1000$ items x R$2000)$ R

Less: Cost of sales $(1000$ items x R$1500)($R$.................)$

Gross margin $/$ gross profit $(1000$ R$..........$ R

Less: Fixed Expenses $($R$.................)$

Net profit R$.................$

Required:

$1.$ Complete the above income statement using the information provided above.

$2.$ What is Marginal Income per unit for each component item sold?.

$3.$ One of your new employees does not understand the concept of marginal income. They cannot appreciate its significance.

You are required to briefly outline the significance of the concept of marginal income and how it is used in business.

$4.$ Marketing is considering increasing the selling prices due to a $10\%$ increase in purchasing costs from a major supplier. What happens if we increase the

component selling price to R$2200$ and sell $1000$ items? Determine the new net profit. $5.$ How many components will have to be sold to make a net profit of R$300,000$ and still sell the component for R$2000?$

$6.$ What happens if we increase the selling price to R$2250$ and still sell $1000$ components? Determine the new net profit.

$7.$ What happens if the cost of sales are reduced by R$50$ per component to R$1450$ and we sell $1200$ components? $($Use the original selling price of R$2000).$ To achieve this, the organisation will incur R$10,000$ on promotional costs, once off. Determine the new net profit.

$8.$ What processes$/$ action should the business engage in to reduce the cost price of buying these goods?

$9.$ What will be the net profit be if they sell $1200$ components for R$2100$ per item?. The Cost of Sales is now at R$1400$ per item but the fixed costs increase by R$300,000.$