Question 1 (15 marks) Monsoon Company Ltd that specialises in the manufacturing of heavy mgation equipment has been experiencing a decline in prots recently The board of directors have challenged management to come up with some cost cutting measures that would require bold decision-making on management's part in order to improve the bottom line The income statement of the company as at 30 September 2018 reflects the following Sales (5,000 units * R15) R75 000 Less vanable expenses 37 500 Cost of goods sold Direct matenals R15 000 Direct labour 10 000 Variable factory overhead 10 000 Selling and administrative 2 500 Contribution margin R37 500 Less fixed expenses 25 000 Factory overhead R10 000 Selling and administrative 15 000 Net income (loss) R1 500 In an attempt to improve the company's profit performance, management is considenng a number of alternative actions 1 Required Determine the effect of each of the following on monthly profit Each situation is to be evaluated independently of all the others Purchasing automated assembly equipment This action should reduce direct labour costs by 40 percent It also will increase vanable overhead costs by 10 percent and fixed factory overhead by R2 500 (5) 2 Reducing the unit selling price by R2 per unit This should increase the monthly sales by 5 000 units Fixed factory overhead will increase by R1 500 (5) Increase fixed selling and administrative expenses by R1 000 for advertising costs The number of units sold will increase to 8 000 units (5) 3