Question

Use the information provided below to answer each of the following questions independently:

2.1

Calculate the break-even quantity.

(2 Marks)

2.2

Calculate the sales value required to achieve a net profit of R150 000, using the marginal income ratio.

(4 Marks)

2.3

Determine the selling price per unit if a net profit of R624 600 is desired.

(4 Marks)

INFORMATION

The following information was extracted from the budget of Mary’s Manufacturers for the period July to December 2021:

1.

Total production and sales

2 300 units

2.

Selling price per unit

R200

3.

Variable manufacturing costs per unit:

Direct materials

R60

Direct labour

R40

Overheads

R20

4.

Fixed manufacturing overheads

R200 000

5.

Other costs:

Fixed marketing and administrative costs

R100 000

Sales commission

10% of sales

Answer 1

2.1

Margin profit:

$200*0.9-60-40-20=60$

the break-even quantity:

$\frac{200\ 000+100\ 000}{60}=5\ 000$ units

2.2

the  sales value required to achieve a net profit of R150 000:

$\frac{200\ 000+100\ 000+150\ 000}{60}=7\ 500$ units

2.3

$\frac{200\ 000+100\ 000+624\ 600}{x*0.9-60-40-20}=2\ 300$

$x=580$ R