QUESTION ONE [20]

Deshi Industries plans to manufacture gas stoves and the following information is applicable:

Estimated sales for the year	3 000 units at R 450 each
Estimated costs for the year:
Variable costs	R320 per unit
Factory overheads (all fixed)	R80 000
Administrative expenses (all fixed)	R30 000

1.1 Calculate the:

1.1.1 Total operating profit for the estimated figures. (4)

1.1.2 Break-even quantity (3)

1.1.3 Break-even value (3)

1.1.4 Margin of safety in units. (3)

1.1.5 Target sales volume to achieve a profit of R50 000. (3)

1.2 The sales manager is of the opinion that a greater profit will be made if the selling price is decreased by 10% as sales volume will then increase by 10%. Calculate the total operating profit at the new selling price and advice management whether to implement this suggestion. (4)