QUESTION 3

(20 Marks)

REQUIRED
Calculate the following from the information provided below:
3.1.1	Break-even value using the marginal income ratio	(4 marks)
3.1.2	Margin of safety (in units)	(4 marks)
3.1.3	Break-even quantity if a sales commission of 20% is introduced.	(4 marks)
INFORMATION
Ascot (Pty) Ltd manufactures a single product and the following budget has been produced by the management accountant:
Sales at R250 per unit	R1 000 000
Variable costs	R600 000
Fixed manufacturing, administrative and marketing costs	R250 000

3.1 All the units produced are expected to be sold. 3.2

REQUIRED

Use the information providedbelow to answerthe following questions independently:

1. If Kempster Limiteddecides on a profit objective of R400 000, calculate the target sales

volume. (4 marks)

1. Calculate the total Marginal Income and Profit/Loss if the company decides to reduce

the selling priceto R28 per unit. (4 marks)

INFORMATION

Kempster Limited expects to incur the following costs to produce and sell 20 000 units of its product at R30 each:

Variable manufacturing cost	R14 per unit
Fixed manufacturing cost	R100 000
Variable marketing cost	20% of sales
Fixed marketing and administrative cost	R40 000