THIS QUESTION PAPER CONSISTS OF 6 PAGES (Excluding this front page) QUESTION 3 (19 marks) Obby Ltd manufactures and sells wireless phones called mini-phones. The mini-phone is a basic model that is very small and slim. The mini-phone fits into a shirt pocket. Obby Ltd market indicated that there has been declining for the last two years. The company has another option to manufactures and sells another model, net-phone, has a larger display and is Internet-ready. The following actual information was available for last year production of 20 000 mini- phones Total direct material costs N$1 000 000 Direct labour per unit N$550 Sales commission 5% Semi-mixed overheads costs N$5 000 000 Fixed administrative overheads N$1 500 000 Sales price per mini-phone N$2 500 Management are now considering of manufacturing and selling both mini-phones and net-phones for the forthcoming financial year in order to improve the company's financial position. Obby Ltd would operate at its maximum production capacity of 40 000 phones per annum which would cause the semi-mixed overheads costs to increase to N$8 000 000 The sales mix of mini-phones to net-phones would be in the ratio 3:2. Net-phone production costs would be almost the same as mini-phone production costs, except the company would be able to negotiate a 5% volume discount on all direct material cost as a result of production volumes being above 30 000 units. Mini-phones and net-phones are made from the same direct materials which are provided by one supplier. In addition, direct labour cost per unit of net-phone would be 150% of mini-phone direct labour cost per unit. Net-phone would be sold for N$1 500 per unit, while mini-phone selling price will decrease by N$500 per unit. Required: Calculate the following based on the forthcoming financial year. 1. Average contribution margin per unit 2. Break-even point (sales value and unit) 3. Percentage of Margin of safety. (8 marks) (8 marks)