The Sales Manager of Leather Products (Pty) Ltd asked you to assist him in preparing a motivation to introduce a new leather handbag into the range of products that the company offers. The company policies are as follows:

1. The selling price is calculated at a mark-up of 50% on variable cost.

2. New products introduced must contribute 15% net profit after tax.

He supplied you with the following information:

	Cost per unit	Other information
Leather	R246.00
Silk material	R350.00
Labour	3 hours @ R185.00 per hour
Overheads	R155.00 per labour hour
Incremental fixed cost		R625,000.00
Tax rate		28%

The sales manager estimated the market sizes to be 2,000 handbags for the year.

Required:

1. Calculate the break- even units of handbags to be sold.

2. Calculate and comment if the handbag will comply with the companys policy regarding the introduction of new products and Show all your calculations