Question 4

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. (7)

Q.4.2 Calculate the breakeven point in units.(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 5 (Marks: 20)

You are provided with the following information with relation to Circle Ltd:

The company operates 52 weeks a year.

50 units of a particular inventory item are used per week.

Order placing costs amount to R50.

Costs of holding a unit are R2.

The cost per unit of inventory is R20.

Required:

Q.5.1

Use the equation below to calculate the economic order quantity for Circle Ltd.

EOQ =