Question
Study the information given below and answer the following questions independently. As far as possible use the contribution margin model to present your answers. 3.1
Study the information given below and answer the following questions independently. As far as possible use the contribution margin model to present your answers. 3.1 Calculate the number of skirts that Beads4us must sell to break even each month. (5 marks) 3.2 Calculate the selling price per unit that will enable Beads4us to break even. (5 marks) Calculate the total Contribution Margin and Operating Profit/Loss, if the selling price drops by R30 per skirt. 3.3 (5 marks) Beads4us is considering paying the salespersons a monthly salary instead of a sales commission. How much can it afford to pay in salaries and achieve an operating profit of R50 000 per month. 3.4 (5 marks) Suppose Beads4us has the opportunity to rent machines to reduce work time. Doing so would increase the total fixed costs of operating the workshop by R12 000 per month. Using the machines will reduce the labour time to 1.5 hours for each skirt. Those who make the skirts will still be paid R30 per hour and material costs remains unchanged. Will renting the machines be more profitable? Show the relevant calculations. 3.5 (5 marks)
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