Suppose Ascot Limited wants to earn an operating profit of R2 700 000 from the battery sales. How much can it afford to spend on the variable manufacturing costs per unit, if the production and sales equal 40 000 units? (4 marks)

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Ascot Limited is confident that it can make and sell a new battery with a prolonged life for cellular phones. The management anticipates the market demand for the new battery to be 40 000 units per year if the battery is priced at R450 per unit. Variable administration and marketing costs are expected to amount to R120 per unit. The companys accountants and engineers estimate that fixed costs to be R1 350 000.