The financial manager of Orbit Limited provided the following forecasts for 2023:
Sales are estimated at 8 000 units with a selling price of R1 800 each. The manufacturing costs include direct materials of R460 per unit, direct labour of R315 per unit, variable overheads of R170 per unit and fixed overheads of R880 000. Fixed selling and administration costs are estimated at R2 000 000 and the variable selling costs are estimated to be 7.5% of sales.

Refer to the forecasts made by the financial manager for 2023 and calculate the following independently. As far as possible, use the contribution margin format of the income statement to present your answers.

Break-even quantity.

The sales value required to make an operating profit of R2 016 000, by using the contribution margin ratio.

The percentage change in the operating profit (expressed to two decimal places), if the selling price and fixed costs increase by 10%.

The total Contribution Margin and Operating Profit/Loss if the sales volume is 10% below expectation.

The selling price per unit (expressed in rends and cents) that will enable the company to break even

Answer rating: 100% (QA)

Breakeven quantity The breakeven quantity is the number of units that Orbit Limited must sell in order to cover its costs The breakeven quantity can b... View the full answer