QUESTION $1$

$(25$ Marks$)$

Casio Glass $C{o}_0,$ a small family run business, manufactures hand$-$blown glass products and has an established reputation for quality going back several decades. Owing to increased demand for its most popular products from customers in the Middle and Far East, Casio Glass Co has focused on manufacturing a single product, a vase available in an array of colours, which has the following cost and selling price structure:

$\backslash$table$[[,$R$/$unit$,$R$/$unit$],[$Selling price,,$280],[$Direct material,$64,],[$Direct labour,$60,],[$Variable overhead,$16,],[$Fixed overhead,${28}_{?},],[,,168],[$Profit per unit,,$112]]$

The fixed overhead absorption rate is based on the normal capacity of $2,000$ units per month. Assume that the same amount is spent each month on fixed overheads. Budgeted sales for next month are $2,200$ units.

Required:

$1\mathrm{.}1$ Calculate the breakeven sales units and the breakeven sales value for the next month.

$(5$ Marks$)$

$1\mathrm{.}2$ Explain the term 'margin of safety' and calculate the margin of safety for the next month.

$(5$ Marks$)$

$1\mathrm{.}3$ Calculate the profit for the next month if sales are $5\%$ lower than budgeted.

$(6$ Marks$)$

$1\mathrm{.}4$ Calculate the sales required $($in units$)$ to achieve a profit of $R259,000$ in the next month given the direct

$(7$ Marks$)$ materials cost increases by $8\%$ and direct labour cost increases by $6\%.$

$1\mathrm{.}5$ State two assumptions made when carrying out breakeven analysis.

$(2$ Marks$)$