QUESTION TWO[21]

New Time company make bookshelves. The following information was extracted from the budget for the year ended 28 February 2019

Estimated sales for the financial year 2000 units

Selling price per bookshelf R600

Variable production cost per bookshelf :

Direct material R180

Direct labour R120

Overheads R60

Fixed production overheads R170000

Selling and administrative expenses

Salary of sales manager for the year R100000

Salary commission10% of sales

Required:

Calculate the following (answers correct to the nearest Rand or whole number)

2.1The breakeven quantity (3)

2.2The breakeven value using the marginal income ratio (3)

2.3The margin of safety in terms of units (3)

Consider each of the following situations independently:

2.4Calculate the number of sales units required to make a profit R180000 (4)

2.5Suppose New Time Company wants to make provision for a 10% increase in fixed

production costs and an increase in variable overhead costs of R20 per unit. Taking these increases into account, calculate the new break-even quantity.(8)