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. Calculate the total net profit for the estimated figures. (3 marks)
2. Calculate the break-even quantity (3 marks)
3. Calculate the break-even value (2 marks)
4. Calculate the break-even value using the marginal income ratio. (3 marks)
5. Calculate the target sales volume to achieve a profit of R920 500.. (3 marks)
6. Calculate the new break-even quantity and value if the selling price is increased by 12% (4 marks)
7. Calculate the margin of safety in units at the original budgeted volume and price (2 marks)