QUESTION FOUR [20]

Study the information provided below for Wooli Wear and answer the following questions independently:

4.1 Calculate the break- even value. (4)

4.2 Calculate the total Contribution Margin and Operating Profit/Loss if all the T-shirts are sold. (4)

4.3 Calculate the sales quantity required to achieve an operating profit of R950 400. (4)

4.4 Calculate the variable costs per unit that will enable Wooli Wear to break even. (4)

4.5 Suppose the owner of Wooli Wear decides to spend R6 000 per month on advertising for the entire year, with the expectation that the sales volume will increase by 10%. What effect would this have on the operating profit of Wooli Wear? Show your calculations.

INFORMATION

Wooli Wear makes T-shirts in a small workshop. The fixed costs of operating the workshop for a year total R302 400. Each T-shirt requires material that costs R21. Each T-shirt takes 1.5 hours to make, and the business pays the T-shirt makers R30 an hour. Each T-shirt is sold to the stores for R120. The business expects to sell 15 000 T-shirts for the year.