QUESTION 2: (Cost-Volume-Profit) (10 Marks) You are the Management accountant for Leather Manufacturers (Pty) Ltd. The company manufactures and sell leather products. The sales manager is constantly evaluating the possibility to introduce new products in the market. He approaches you with the following data regarding a new handbag which he wants to introduce in the market. He believes there is an annual estimate market to sell 2,500 of these new handbags. Medium Size full leather Handbag Estimated selling price Leather cost Material for the lining Consumable costs: Labour: 3 hours @ R95 per hour Additional annual marketing expenses: Additional Internal sales representative salary per month Monthly rent of additional workspace Additional other fixed costs R 2. Draft a Direct Cost Income Statement. (3) 3. Calculate the margin of safety. (1) 1,950 950 250 150 285 20,000 10,000 2,000 36,000 The company's criteria are that each new product must contribute 10% of the total sales value as a pre-tax profit. Required: 1. Advise the sales manager if the new handbag will comply with the company's evaluation parameters. (6)