QUESTION 2 (20 Marks) The following budgeted information for the year ended 31 December 2020 in provided by Voltex Lad, a manufacturer of a single product Sales 30 000 units) Direct material Direct labour Variable manufacturing overheads Sales commission Total fixed costs TOTAL R 360 000 54 000 42 000 33 000 33 000 R78 000 The sales forecast for the year ended 31 December 2020 is 15% less than the actual sales for the year ended 31 December 2019. The sales director produced three proposals to improve the position Proposal A involves launching an aggressive marketing campaign. This would involve a single additional fixed cost of R18 000 for advertising, Sales commission will increase by R1.20 per unit . Sales volume is expected to increase by 10% above the 2020 budgeted sales with no change in the unit selling price Proposal B involves a 10% reduction in the unit selling price. Fixed selling overheads will also reduce by R12 000. The budgeted sales volume is expected to increase by 10% Proposal involves a 10% reduction in the unit selling price and this is estimated to bring the sales volume back to the budgeted level as the year ended 31 December 2019. The sales force will be incentivised with a salary increase totaling R15 000 for the year REQUIRED 2.1 Due to the uncertainties related to forecasted sales which have been compounded with the effects of COVID19, the financial manager would like to know which of the three proposals have the least risk in terms of achieving a sales volume that would not result in a loss. (4 marks) 2.2. The financial director has asked you to indicate which of the three proposals should be chosen to achieve the highest operating profits (14 marks) 2