Toyota South Africa is considering the production of a new hybrid vehicle, the Toyota EcoCar. As a consultant specialising in the automotive industry, you have been tasked with assisting Toyota with the cost management and planning for the new vehicle.

Toyota has estimated the following costs:

Fixed costs R2,000,000 per year

Variable costs R20,000 per unit

Selling/Purchase price R35,000 per unit

Anticipated purchase volume 500 units

Questions

a) Suppose Toyota South Africa sells 500 EcoCars in a year; what would its total profit be? [2]

b) Calculate the number of EcoCars Toyota South Africa needs to produce to break even. [2]