FASSET CLASS $2024$: EXAM PREPARATION

$\backslash$table$[[$Questions$,$Topics$],[$Question $1,$Make or Buy$],[$Question $2,$Special order$],[$Question $3,$IRR, Payback, Discounted Payback, ARR$]]$

Question $1$

Tsholofelo and Anne are third$-$year accounting students pursuing their qualification at the University of Johannesburg. The two ladies are fashionistas on campus, and other students imitate their fashion statements. After winning the lottery, the ladies decided to start a small fashion business where they would manufacture and sell traditional skirts with a modern twist.

The ladies did a preliminary study and discovered that they could sell fifty skirts a month. The ladies require the following resources to manufacture a skirt:

One skirt requires $1\mathrm{.}2$ metres of fabric. The fabric costs R$45$ per meter.

Each skirt requires a zipper. A local supplier only sells zippers in boxes, with one box containing ten zippers. Each box of zippers costs R$250.$

Each skirt requires an elastic waistband that can be purchased for R$70$ per band.

They will purchase two second$-$hand sewing machines to make the skirts for R$900$ each.

Two mannequins will be purchased at a total price of R$2200$ and will be used for tailoring purposes.

Instead of manufacturing the skirts, the ladies found out that they could buy the skirts from Tshiamo. The only condition is that they must provide Tshiamo with sketches of the exact customers' measurements and style. In this regard, they gathered the following information:

They would need to hire a sketch artist to create the sketches that Tshiamo requires to make the skirts. A sketch artist will charge them R$25$ per skirt.

Tshiamo would charge them R$120$ per skirt. The ladies would need to pay R$350$ in monthly delivery expenses.

REQUIRED

$2\mathrm{.}1$ Determine whether Tsholofelo and Anne should make or buy the skirts. Your calculations must be done on a yearly basis.

$(9)$