QUESTION $2$

$(20$ MARKS$)$

Rich Mnizi $($Pty$)$ Ltd $($hereafter $"$RM$")$ is a well$-$established company that manufactures trendy fashionable clothing, including both a women's and men's range, to be sold at a local market that is open every Saturday in Braamfontein. RM has a $30$ April year$-$end.

The company has become increasingly aware of their need to align the company values with good corporate governance and social development. As a result of this, RM has a long standing agreement with Oceana Clothing $($Pty$)$ Ltd $($hereafter $"$OC$"),$ a charity shop, to provide any unsold stock at the end of the season at a discount. The sale to OC occurs at the beginning of the next season.

OC is extremely reliant on the proceeds from the sale of RM products because the brand name is so popular and stock can be sold at a reasonable price. On $1$ May $2023$ RM signed the annual sales agreement with OC that stipulated that RM will sell to OC any unsold stock at $70\%$ of its original cost. In the event that the total sale proceeds of the inventory sold to OC is less than R$150000,$ RM agreed to donate the difference in cash to the orphanage that OC supports.

You extracted the following summary production and sales forecast for $2024$ from the management accounts:

$\backslash$table$[[,\backslash$table$[[$Cost of$],[$production per$],[$unit$]],\backslash$table$[[$Number of$],[$units$],[$produced$*]],\backslash$table$[[$Selling price$],[$per unit$]]],[$May $-$ Aug,R$300,1580,$R$420],[$Sept $-$ Dec,R$330,3200,$R$448],[$Jan $-$ Apr,R$400,1650,R560$