WTLLtd produces a stylish yet affordable handbag that sells for R30 per unit. Variable costs to manufacture and sell are R16 per unit. Fixed costs and expenses are budgeted at a total of R 54 600 per year.

Required:

3.1Discuss the concept contribution margin.

3.2Calculate the break-even value in Rands.

3.3Calculate the net income to be expected on sales of R240 000.

3.4Calculate the sales revenue required to produce net income of R7 000.

3.5If fixed costs were to be increased by R 25 760, calculate the increase in sales revenue that would be required to cover the increase in fixed costs. 3.6If the selling price is decreased by 20%, what percentage increase in the number of units sold is necessary to offset this decrease in selling price.

QUESTION FOUR

Additional information:

1. It is expected that debtors will settle their accounts as follows:

20% in the month of invoice

70%in the month after the month of invoice, and

5% in the second month after the month of invoice.

The remaining 5% is usually written off as bad debts

2. Trade creditors are paid in the month after the purchases at a discount of 5%.

3. 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred.

4. Expenses are paid as they arise.

5. The favorable bank balance on 1 November was R 16 000.Required:

4.1Prepare the cash budget for November and December.

4.2Discuss how the budgeting process in an organization benefits a functioning standard costing system.

The following information pertains to SMR Ltd for the three months ended 31 December