REQUIRED Study the information given below and answer the following questions independently: 3.1 Use the contribution margin ratio to calculate the sales value required to break even. 3.2 Calculate the margin of safety (as a percentage). 3.3 Determine the sales volume required to achieve double the forecast operating profit for 2024. 3.4 Suppose SolarCor Ltd is considering a R50 per unit decrease in the selling price of the product, with the expectation that this would increase the annual sales volume by 25%. Calculate the total Contribution Margin and Operating Profit/Loss. 3.5 Determine the selling price per unit (expressed to the nearest cent) that would enable SolarCor Ltd to break even, if all 30 000 units are produced and sold. INFORMATION SolarCor Ltd produces a single product. The following forecasts for 2024 are available: The budgeted sales are 30 000 units at R800 per unit. Manufacturing costs include direct materials at R160 per unit, direct labour at R100 per unit, variable overheads at R44 per unit and fixed overheads of R1 920 000. Marketing costs include a sales commission of 6% (of the selling price) and R2 592 000 for advertising and salaries. Administration costs include R4 608 000 for fixed costs and variable costs of R48 per unit sold.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter4A: Nopat Breakeven: Revenues Needed To Cover Total Operating Costs

Section: Chapter Questions

Problem 1EP

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Question

REQUIRED

Study the information given below and answer the following questions independently:

3.1 Use the contribution margin ratio to calculate the sales value required to break even.

3.2 Calculate the margin of safety (as a percentage).

3.3 Determine the sales volume required to achieve double the forecast operating profit for 2024.

3.4 Suppose SolarCor Ltd is considering a R50 per unit decrease in the selling price of the product, with the expectation that this would increase the annual sales volume by 25%. Calculate the total Contribution Margin and Operating Profit/Loss.

3.5 Determine the selling price per unit (expressed to the nearest cent) that would enable SolarCor Ltd to break even, if all 30 000 units are produced and sold.

INFORMATION

SolarCor Ltd produces a single product. The following forecasts for 2024 are available:
The budgeted sales are 30 000 units at R800 per unit.
Manufacturing costs include direct materials at R160 per unit, direct labour at R100 per unit, variable overheads at R44 per unit and fixed overheads of R1 920 000.
Marketing costs include a sales commission of 6% (of the selling price) and R2 592 000 for advertising and salaries.
Administration costs include R4 608 000 for fixed costs and variable costs of R48 per unit sold.

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