$5\mathrm{.}2.$ Use the information provided below to answer the following questions.

INFORMATION

Suppose a prominent multinational company $($MNC$)$ is contemplating the establishment of a new manufacturing facility in

South Africa, intending to serve customers across the Southern African Development Community $($SADC$)$ region. The

company is currently in the final stages of selecting a suitable location for the facility from three potential cities:

Johannesburg, Cape Town, and Durban.

The following valid and reliable data for the three locations are available for a locational break$-$even analysis: Location Johannesburg Cape Town Durban

Expected sales $($@R$2500$ per unit$)5000$ units $5000$ units $5000$ units

Total fixed manufacturing costs R$600000$ R$1200000$ R$2200000$

Direct material cost per unit R$400$ R$200$ R$130$

Direct labour cost per unit R$150$ R$120$ R$100$

Variable overhead per unit R$200$ R$180$ R$1205\mathrm{.}2\mathrm{.}1.$ Specify THREE steps that the multinational company should consider in the locational break$-$even

analysis.

$(3$ marks$)$

$5\mathrm{.}2\mathrm{.}2.$ On the basis of the data provided above, undertake a locational cost$-$volume analysis to determine

the most suitable location for the MNC$$s facility in South Africa. As part of the analysis, $($a$)$ formulate the

cost function for each of the three locations, $($b$)$ determine the total cost for each location for the $5000$

units of production, and $($c$)$ calculate the expected profit for each location if all the $5000$ units produced are

sold at R$2500$ per unit.