Question
QUESTION ONE (20 Marks) INFORMATION Busta Limited plans to manufacture bar fridges and the following information is applicable: Estimated sales for the year 5 000
QUESTION ONE (20 Marks) INFORMATION Busta Limited plans to manufacture bar fridges and the following information is applicable: Estimated sales for the year 5 000 units at R3 400 each Estimated costs for the year: Variable costs Direct Material R520 per unit Direct Labour R350 per unit Variable Manufacturing Cost R110 per unit Selling expenses 6% of selling price per unit sold Factory overheads (all fixed) R625 000 Administrative expenses (all fixed) R462 000 REQUIRED: 1.1 Calculate the total net profit for the estimated figures. (3 marks) 1.2 Calculate the break-even quantity (3 marks) 1.3 Calculate the break-even value (2 marks) 1.4 Calculate the break-even value using the marginal income ratio. (3 marks) 1.5 Calculate the target sales volume to achieve a profit of R920 500.. (3 marks) 1.6 Calculate the new break-even quantity and value if the selling price is increased by 12% (4 marks) 1.7 Calculate the margin of safety in units at the original budgeted volume and price (2 marks) QUESTION TWO (20 Marks) REQUIRED Study the information provided below and answer the following questions: 2.1 Calculate the Payback Period of both projects (answers expressed in years, months and days.) Which project would you choose on the basis of payback period? Why? (6 marks) 2.2 Calculate the Accounting Rate of Return for both projects (answer expressed to two decimal places). (6 marks) 2.3 Calculate the Net Present Value for both projects. (Round off amounts to the nearest Rand.) (6 marks) 2.4 Based on your calculations from 2.1 2.3, which project should Rothmans Limited choose? Why? . (2 marks) INFORMATION The
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