Question
Walka Ltd manufactures leisure sandals for men and ladies from leather. The shoes are made by hand, and the shoemakers take 2 hours to finish
Walka Ltd manufactures leisure sandals for men and ladies from leather. The shoes are made by hand, and the shoemakers take 2 hours to finish a pair of ladies shoes and 3 hours for men's shoes. Walka pays the labourers R75 per labour hour. The rent and other fixed overheads amount to R50 000 per month. Additional operational and cost information are as follows: Ladies Men Sales price R550 R650 Cost of leather per meter R175 R175 Variable overhead rate per labour hour R24 R24 Leather used per pair of shoes (meters) 0.9 1 Pairs of shoes produced and sold 720 480 Required: 1.1 Calculate the contribution per pair of shoes. 1.2 Calculate the break-even units and value of Walka for the month. Divide by twenty to arrive at the sales mix. 1.3 Walka is on a drive to increase its sales and decided to engage in an advertising campaign on a popular television channel for a month. The campaign will cost them R150 000 for the month. What is the break-even units and value of Walka during the month that they run the campaign? 1.4 Refer to question 1.3. Is the advertising campaign worth the value of the cost, if you compare the new break-even information with the current operational status? 1.5 Refer to question to the original information. The tax rate is 28%. Walka wants to achieve an operating income of R90 000 per month. How many ladies and men's shoes should Walka sell?
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