Q.2.2 Differentiate clearly between a fixed cost and a variable cost by referring to some (5)

examples. (Hint: Do not only give definition but clearly differentiate).

The following information applies to Q.2.3

The budgeted information on two business opportunities that Jack is currently considering investing in is as follows:

Q.2.3

Required:

Calculate the break-even point in units for opportunity one.

Show your workings.(7)

Q.2.4

Calculate the break-even point in sales revenue for both opportunities assuming that opportunity two has a marginal income per unit of R22.50.

Show your workings.

Round to the nearest Rand.

(4)

Q.2.5 Make a recommendation to management which opportunity to choose and provide reasons for your recommendation. You can assume that opportunity two has a break-even point in units of 8 889. (2)

Q.2.2 Differentiate clearly between a fixed cost and a variable cost by referring to some (5) examples. (Hint: Do not only give definition but clearly differentiate). The following information applies to Q.2.3 - Q.2.5 The budgeted information on two business opportunities that Jack is currently considering investing in is as follows: Opportunity 1 Opportunity 2 Total (R) Per unit (R) Total (R) Per unit (R) Sales 600 000 300 600 000 30 Less: Costs 398 000 199 350 000 17.50 Variable direct 156 000 78 60 000 3 manufacturing costs Variable indirect 80 000 40 50 000 2.50 manufacturing costs Fixed manufacturing 60 000 30 120 000 6 overheads Sales commission 30 000 15 40 000 2 Fixed administrative 72 000 36 80 000 4 costs 202 000 101 250 000 12.50 (7) Q.2.3 Calculate the break-even point in units for opportunity one. Show your workings. (4) Q.2.4 Calculate the break-even point in sales revenue for both opportunities assuming that opportunity two has a marginal income per unit of R22.50. Show your workings. Round to the nearest Rand Q.2.5 Make a recommendation to management which opportunity to choose and provide (2) reasons for your recommendation. You can assume that opportunity two has a break-even point in units of 8 889