Part $1$ Part $1$

A company manufactures a single product which it sells for $N$$$15\mathrm{.}00$ per unit. Variable costs

of production and fixed costs of production are $N$$$6\mathrm{.}00$ per unit and $N$$$135000$ per period

respectively. The distribution of the product results in additional variable costs of $N$$$1\mathrm{.}20$ per

unit and additional fixed costs of $N$$$30750$ per period. The company is budgeting sales of

$N$$$375000$ for the coming period and its maximum production capacity is $35000$ units per

period.

Part $2$

The company is keen to improve its budgeted profit through increased sales in the coming

period and is considering the following alternative sales strategies:

Strategy $I$

Reduce selling price by $10\%$ in order to increase the total budgeted sales units by $25\%.$ In

addition,

an advertising campaign costing $N$$$7500$ will further increase the original budgeted sales

units by $8\%.$

Strategy II

Offer a $20\%$ selling price discount to a single major customer who is prepared to buy $35000$

units.

This will result in a $90\%$ reduction in the fixed distribution costs per period.

If either of the sales strategies is adopted, variable costs of production will increase by

$N$$$0\mathrm{.}30$ per unit produced above $28000$ units.

A company manufactures a single product which it sells for N$$15\mathrm{.}00$ per unit. Variable costs

of production and fixed costs of production are N$$6\mathrm{.}00$ per unit and N$$135000$ per period

respectively. The distribution of the product results in additional variable costs of N$$1\mathrm{.}20$ per

unit and additional fixed costs of N$$30750$ per period. The company is budgeting sales of

N$$375000$ for the coming period and its maximum production capacity is $35000$ units per

period.

Required

Marks

Subtotal Total

$1\mathrm{.}1$

Calculate for the coming period, the budgeted:

$($i$)$ break$-$even point $($in sales units$)$

$($ii$)$ profit.

$66$

Total $6$