REQUIRED Answer each of the following questions independently:

3.1 Calculate the number of bags that must be sold to break even. (4 marks)

3.2 Calculate the margin of safety as a percentage. (4 marks)

3.3 Calculate the number of units that must be sold to earn an operating profit of R480 000. (4 marks)

3.4 Determine the variable manufacturing cost per unit that will enable the company to break even, if the selling price of R400 per unit is maintained. (4 marks)

3.5 The management of Hondurus Limited has a strategy to reduce fixed manufacturing costs by 10% and can thereby drop the selling price by R20 per unit. If the sales volume increases by 1 000 units, calculate the new total contribution margin and operating profit/loss. (4 marks)

INFORMATION Pesco Limited produces and sells ladies bags for R400 each. Each bag is manufactured using 0.5 metres of material and the time required to produce each bag is 1.5 hours. Materials cost R200 per metre and the labour cost is R40 per hour. Variable manufacturing overheads amount to R40 per bag. Salespersons receive a commission of 10% on the sales that they generate. Fixed manufacturing costs amount to R2 400 000 per year. Annual fixed selling and administrative costs total R600 000. Pesco Limited expects to produce and sell 20 000 bags for the year.