QUESTION 4 (20 Marks)

Greenweed Limited manufactures specially treated garden benches. The following information was extracted from the budget for the year ended 29 February 2020:

The estimated sales for the financial year are 2000 units. The selling price per garden bench is R450. Variable production cost per garden bench comprises of the following:

Direct materials: R135

Direct Labour: R90

Overheads: R45

The cost for fixed production overheads are R127 500 and selling and administrative expenses are broken down as follows:

Salary of sales manager for the year: R75 000

Sales commission: 10% of sales

Required: (Round of answers to the nearest rand or whole number)

4.1 Calculate the breakeven quantity. (4 marks)

4.2 Determine the break-even value using the marginal income ratio. (4 marks)

4.3 Calculate the margin of safety. (4 marks)

4.4 Determine the number of sales units required to make a profit of R150 000. (3 marks)

4.5 Suppose Greenweed Limited wants to make provision for a 10% increase in fixed production costs and in increase in variable costs of R15 per unit. Calculate the new break even quantity ( 5 marks)

and an increase in variable costs of R15 per unit. Calculate the new break-even quantity. (5 marks)