Question 4

(Marks: 20)

Silver Ltd produces an aluminium reusable drinking straw distributed by agents to retail outlets throughout South Africa. The following extracted information has been provided by the Accountants for Silver Ltd for the year ending 28 February 2019:

Q.4.1 Calculate the marginal income ratio.

Q.4.2 Calculate the breakeven point in units.

(7) (5)

Q.4.3 How many straws should Silver Ltd sell to achieve a profit before tax of R50 000? (3)

Q.4.4 Costs can be classified into various costs categories. List three categories into (3)

which commission paid can be classified.

Q.4.5 With reference to a relevant example, explain what sunk costs are. (2)

Question 4 (Marks: 20) Silver Ltd produces an aluminium reusable drinking straw distributed by agents to retail outlets throughout South Africa. The following extracted information has been provided by the Accountants for Silver Ltd for the year ending 28 February 2019: Selling price of one straw R80 Material cost of one straw R25 Direct labour cost of one straw R10 Variable overhead of one straw R5 Commission paid to agent per straw R5 Rental of premises R15 000 Admin expenses R5 000 Salaries and wages R100 000