Proposal $1$

Customers will be allowed to purchase diesel on credit. It is estimated that $60\%$ of the average monthly sales

$($in litres$)$ will be to customers who would take advantage of this opportunity. Sales to these customers should

increase by $25\%$ as they are expected to buy exclusively from this service station. Sales volumes to

customers who do not take advantage of the credit policy are expected to remain unchanged. Additional costs

arising from this proposal are expected to be:

$$ Bad debts of $1\%$ of the sales value in respect of customers who use the credit facility.

$$ Fixed administrative costs of R$7500$ per month.

Proposal $2$

An operating profit of R$25000$ per month would be the target. To achieve this the following changes are

suggested:

$$ The selling price is reduced by R$0\mathrm{.}30$ per litre.

$$ A sales commission of R$1\mathrm{.}50$ per $10$ litres sold will be granted to the diesel attendants.

$$ R$5075$ per month will be spent on advertising.

Proposal $3$

The possibility of only operating from $06$:$00$ to $22$:$00$ is being considered. This earlier closing time is expected

to result in a loss of sales on average of $12500$ litres per month. It is hoped that the saving in fixed costs

resulting from the reduction in operating hours will enable the entrepreneur to achieve an average monthly

operating profit of R$30000$

Refer to the three proposals that the company was considering to assist the previously disadvantaged women

and answer each of the questions independently. $($You are advised to use the expanded contribution margin

model to present your answers.$)$

$4\mathrm{.}1$ Based on the figures achieved for July to December $2022,$ calculate the selling price per

litre that would have enabled the service station to break even.

$4\mathrm{.}2$ Based on the figures achieved for July to December $2022,$ how many litres of diesel would

have had to be sold to achieve an operating profit of R$2$ per litre?

$4\mathrm{.}3$ Calculate the total Contribution Margin and Operating Profit$/$Loss per month if Proposal $1$ is

implemented.

$4\mathrm{.}4$ How many litres of diesel need to be sold each month to achieve the operating profit of

R$25000$ per month, if Proposal $2$ is accepted?

$4\mathrm{.}5$ Calculate the saving in monthly fixed costs that is necessary to yield an operating profit of

R$30000$ if Proposal $3$ is accepted.