QUESTION 1 [25 MARKS] (a) (b) Explain briefly the cost plus pricing approach. [3 marks] Jess Ltd is a company manufacturing a single product under the name of Lambda. The costs are as follows: Direct Materials/Unit Direct Labour/Unit Direct Manufacturing Expenses/Unit Variable Selling & Distribution Costs/Unit Fixed Production Overhead Fixed Selling and Administration Costs $ 9 30 4.5 5.5 120,000 80,000 It is the policy of the company to add 20% on total costs. The company plans to manufacture and sell 35 000 units. Required i. Calculate the selling price/unit to be charged. [6 marks] ii. Calculate the total profit based on your answer from (b) (i. [4 marks] (c) Explain briefly the contribution pricing approach. [3 marks] (d) Jess Ltd has another product namely Rho. The costs are as follows: $ Direct Materials/Unit 12 Direct Labour/Unit 15 Direct Manufacturing Expenses 10 Variable Selling & Distribution Costs 14 Fixed Production Overhead 140,000 Fixed Selling & Administration Costs 75,000 Selling Price/Unit 100 Jess Ltd has been approached by a customer for an order of 25 000 units at a preferential price of $50/unit. Page 2 of 6 (1) Advise the directors of Jess Ltd whether the order may be accepted. Assume the company has spare capacity. [5 marks] (ii)Jess Ltd is actually producing and selling 90 000 units of Rho. Based on your answer of part (d) (i), calculate the total profit of Rho. [4 marks]