Study the scenario and complete the questions that follow: Nonna Greco Limited Nonna Greco Limited manufactures and sells Italian HIP sunglasses. The following information relates to January 2020: Units manufactured and sold: 500 Income statement: R Sales 261 500 Less: Manufacturing costs 223 000 Material 75 000 Labour 50 000 Manufacturing overheads (@ R20 per machine hour) 98 000 38 500 Less: Selling and administrative expenses (60% fixed) 17 500 Net profit 21 000 The following changes will come into effect on 1 February 2020: A sales price increase of 10%, resulting in a 5% decrease in sales volume. Due to negotiations with the labour union, the labour rate per hour will increase by 6%. It is expected that material costs will increase by 10%. The variable budget for manufacturing overheads indicates a total cost of R94 400 at a capacity utilisation of 4 600 hours. Source: Hunde, T. (2020) Required: 3.1 Calculate the total marginal income and marginal income per unit for the year ended 1 February 2020. 3.2 Determine how many Italian HIP sunglasses should be sold to break even. 3.3 Determine the margin of safety envisaged for February 2020
Question 3
Study the scenario and complete the questions that follow:
Nonna Greco Limited
Nonna Greco Limited manufactures and sells Italian HIP sunglasses. The following information relates
to January 2020:
Units manufactured and sold: 500
Income statement:
R
Sales 261 500
Less:
Material 75 000
Labour 50 000
Manufacturing
38 500
Less: Selling and administrative expenses (60% fixed) 17 500
Net profit 21 000
The following changes will come into effect on 1 February 2020:
A sales price increase of 10%, resulting in a 5% decrease in sales volume.
Due to negotiations with the labour union, the labour rate per hour will increase by 6%.
It is expected that material costs will increase by 10%.
The variable budget for manufacturing overheads indicates a total cost of
R94 400 at a capacity utilisation of 4 600 hours.
Source: Hunde, T. (2020)
Required:
3.1 Calculate the total marginal income and marginal income per unit for the year ended 1 February 2020.
3.2 Determine how many Italian HIP sunglasses should be sold to break even.
3.3 Determine the margin of safety envisaged for February 2020 and briefly state the
significance thereof
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