$5\mathrm{.}2$

REQUIRED

Study the information provided below and answer the following questions:

$5\mathrm{.}2\mathrm{.}1$ Does Sabrina Limited have spare capacity to accept the special order? Motivate your answer.

$(2$ marks$)$

$5\mathrm{.}2\mathrm{.}2$ Should the company accept the special order? Show all the relevant calculations.

$(6$ marks$)$

$5\mathrm{.}2\mathrm{.}3$ Explain TWO $(2)$ possible negative consequences to Sabrina Limited of accepting the special order if a profit is expected from the sale.

$(4$ marks$)$

INFORMATION

Sabrina Limited expects to manufacture $40000$ units of Product J$,$ using $80\%$ of its normal capacity. The costs to manufacture $40000$ units of Product $J$ are as follows:

$\backslash$table$[[,$R$],[$Fixed manufacturing overheads,$400000],[$Variable manufacturing overheads,$84000],[$Direct materials cost,$288000],[$Direct labour cost,$224000],[$Variable marketing costs,$76000],[$Fixed marketing and administrative costs,$710000]]$

The selling price is R$45$ per unit. However, a customer has offered to pay R$28$ per unit for an additional $9000$ units.