Note: The expanded contribution margin model MUST be used to answer all the questions. 3.1 REQUIRED Use the information provided below to answer the following questions: 3.1.1 Calculate the total revenues at break-even (without using the contribution margin ratio) if the sales manager's proposal is rejected. (4 marks) If the sales manager's proposal is accepted, calculate the following: 3.1.2 3.1.3 The additional expenditure that the company can afford on advertising The break-even quantity (4 marks) (4 marks) (4 marks) 3.1.4 The selling price per unit that will enable the company to break-even. INFORMATION Yippy Limited manufactures a product that sells for R180 each. The company presently produces and sells 90 000 units per year. The unit variable manufacturing costs and selling costs are R90 and R18 respectively. Fixed costs are R4 536 000 for manufacturing overheads and R1 944 000 for selling and administrative activities. The sales manager has proposed that the selling price be increased to R216 per unit. To maintain the present sales volume, advertising must be increased. The company's profit objective is an operating margin of 10%. 3.2 REQUIRED Suppose Boardmans Limited wants to earn an operating profit of R1 800 000 from the battery sales. How much can it afford to spend on the total variable costs if the production and sales are 20 000 units? INFORMATION (4 marks) Following substantial research, Boardmans Limited is confident that it can make and sell a new battery with a prolonged life for mobile phones. The management anticipates the market demand for the new battery to be 20 000 units per year if the battery is priced at R300 per unit. The fixed costs of producing between 19 000 and 25 000 units is estimated to be R900 000.
Note: The expanded contribution margin model MUST be used to answer all the questions. 3.1 REQUIRED Use the information provided below to answer the following questions: 3.1.1 Calculate the total revenues at break-even (without using the contribution margin ratio) if the sales manager's proposal is rejected. (4 marks) If the sales manager's proposal is accepted, calculate the following: 3.1.2 3.1.3 The additional expenditure that the company can afford on advertising The break-even quantity (4 marks) (4 marks) (4 marks) 3.1.4 The selling price per unit that will enable the company to break-even. INFORMATION Yippy Limited manufactures a product that sells for R180 each. The company presently produces and sells 90 000 units per year. The unit variable manufacturing costs and selling costs are R90 and R18 respectively. Fixed costs are R4 536 000 for manufacturing overheads and R1 944 000 for selling and administrative activities. The sales manager has proposed that the selling price be increased to R216 per unit. To maintain the present sales volume, advertising must be increased. The company's profit objective is an operating margin of 10%. 3.2 REQUIRED Suppose Boardmans Limited wants to earn an operating profit of R1 800 000 from the battery sales. How much can it afford to spend on the total variable costs if the production and sales are 20 000 units? INFORMATION (4 marks) Following substantial research, Boardmans Limited is confident that it can make and sell a new battery with a prolonged life for mobile phones. The management anticipates the market demand for the new battery to be 20 000 units per year if the battery is priced at R300 per unit. The fixed costs of producing between 19 000 and 25 000 units is estimated to be R900 000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Note: The expanded contribution margin model MUST be used to answer all the questions.
3.1
REQUIRED
Use the information provided below to answer the following questions:
3.1.1
Calculate the total revenues at break-even (without using the contribution margin ratio)
if the sales manager's proposal is rejected.
(4 marks)
If the sales manager's proposal is accepted, calculate the following:
3.1.2
3.1.3
The additional expenditure that the company can afford on advertising
The break-even quantity
(4 marks)
(4 marks)
(4 marks)
3.1.4 The selling price per unit that will enable the company to break-even.
INFORMATION
Yippy Limited manufactures a product that sells for R180 each. The company presently produces and sells
90 000 units per year. The unit variable manufacturing costs and selling costs are R90 and R18 respectively.
Fixed costs are R4 536 000 for manufacturing overheads and R1 944 000 for selling and administrative
activities.
The sales manager has proposed that the selling price be increased to R216 per unit. To maintain the present
sales volume, advertising must be increased. The company's profit objective is an operating margin of 10%.
3.2
REQUIRED
Suppose Boardmans Limited wants to earn an operating profit of R1 800 000 from the battery
sales. How much can it afford to spend on the total variable costs if the production and sales
are 20 000 units?
INFORMATION
(4 marks)
Following substantial research, Boardmans Limited is confident that it can make and sell a new battery with
a prolonged life for mobile phones. The management anticipates the market demand for the new battery to
be 20 000 units per year if the battery is priced at R300 per unit. The fixed costs of producing between 19 000
and 25 000 units is estimated to be R900 000.
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