QUETSION 2 (50 MARKS] COST VOLUME PROFIT ANALYSIS Linda is contemplating selling graduation gowns to Mulungushi University. She has rented room G51 at the Mulungushi University administration block for a fixed period of one month. The rental cost for room GS1 is K20 000. Linda purchases each gown for K300 and sells each gown to graduates at K1 800 each. Linda has been given three payment options by Mulungushi University: Option 1: Pay a fixed rental of K20 000 Option 2: Pay a fixed rental of K10000 and 20% of the revenues Option 3: Pay 25% of the revenues A Calculate the breakeven point in units for Linda's business using Options 1 and 2. [4 Marks) B. Calculate the breakeven revenues for option 1 and 2 using the contribution margin percentage formula [12 Marks] C. Calculate the Degree of Operating Leverage under each of the three options assuming a target sales level of 40 gowns. Discuss your results in relation to the risk of each option. [10 Marks] D. Using Option I and 2, at what price does Linda have to sell the gowns if she were to sell 100 gowns and realise a target operating income of K20 000? (6 Marks] E. Linda is contemplating advertising her products at a fixed fee of K5000. She envisages that her sales will increase by 20% from the current sales of 100 gowns, Calculate the operating income under option 1 and 2. Assume a selling price of K1 800 per gown.[8 Marks F. In addition to the gowns, Linda plans to sell Mulungushi University branded flasks to the graduates at K80 each. She will purchase each Flask for K40. Assuming a 60:40 ratio of gowns to flasks, what will be the breakeven point in units for each of the products under Option 1? Ignore advertising costs. [10 Marks]