1: Wanda runs a home laundry service, Kwicky Washy Ltd, where customers laundry is collected, washed, ironed,
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Question:
Required:1.1 Identify which of the costs are fixed and which are variable. (8 marks)1.2 Calculate the variable cost per bag of laundry laundered. (6 marks)
Question 2: Naidoo Ltd, a retailer of men’s shirts located around Durban, is investigating the likely sales prospects for next year. Theoriginal projection expected that 75 000 shirts would be sold at R10.60 each. The variable costs would be R4.20 per unitand the relevant fixed costs were expected to be R220,000.Three possible alternative strategies have been suggested:Option 1 The managing director thinks that more could be sold ifthe price were reduced by 5%.Option 2 The production manager thinks that the price could beincreased by 10% with only a small loss in sales.Option 3 The sales manager proposes that the variable cost shouldbe increased by 20p per unit as commission to the salesforce, with a consequent saving in fixed costs of R15 000.
Required:
2.1 Calculate the break-even point if the original proposal is adopted (2 marks)
2.2 Calculate the anticipated profit if the original proposal is adopted (2 marks)Calculate the levels of sales required under the proposals 1 and 2 to achieve the profit computed in(1) above
.2.3 (5 marks)Calculate the break-even point if the sales manager's proposal is accepted and compare this withthe break-even point under the original proposal.
2.4 (4 marks)2.5 List three assumptions of Cost Volume Profit analysis. (3 marks)
Related Book For
Microeconomics
ISBN: 9781464146978
1st Edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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