Accounting for managers

Question 2 (20 marks) The Sales Manager of Letlalo Products (Pty) Ltd asked you to assist him in preparing a motivation to introduce a new leather handbag into the range of products that the company offers. The company policies are as follows: 1. The selling price is calculated at a mark-up of 50% on variable cost. 2. New products introduced must contribute 15% net profit after tax. He supplied you with the following information: Other information Leather Silk material Labour Overheads Incremental fixed cost Tax rate Cost per unit R246.00 R350.00 3 hours @ R185.00 per hour R155.00 per labour hour R625,000.00 28% The sales manager estimated the market size to be 2,000 handbags for the year. Required: 1. Calculate the break-even units of handbags to be sold. (10 Marks) 2. Calculate and comment if the handbag will comply with the company's policy regarding the introduction of new products. (Show all your calculations as method marks will be awarded. (10 Marks)