QUESTION $3$

$(20$ Marks$)$

REQUIRED

Use the information given below to answer each of the following questions independently:

$3\mathrm{.}1$

How many units must Pentel Limited sell to break even?

$(4$ marks$)$

$3\mathrm{.}2$

Calculate the margin of safety $($in rands$).$

$(4$ marks$)$

$3\mathrm{.}3$

Use the marginal income ratio to determine the sales value required to achieve a net profit of R$720000.$

$(4$ marks$)$

$3\mathrm{.}4$

Based on the expected sales volume of $12000$ units, determine the sales price per unit $($expressed to the nearest cent$)$ that will allow the company to break even.

$(4$ marks$)$

$3\mathrm{.}5$

Suppose Pentel Limited decides to advertise the product heavily and set the sales price at R$160$ and the sales commission at $15\%$ of sales. If a further R$40000$ is spent on advertising and the sales increases to $13000$ units, calculate the total Marginal Income and Net Profit$/$Loss$.$

$(4$ marks$)$

INFORMATION

Pentel Limited is applying CVP analysis to a new product that it plans to manufacture. The following data, based on expected sales of $12000$ units, are provided for analysis:

Variable manufacturing costs

R$936000$

Fixed manufacturing costs

R$390000$

Sales commission $($calculated at $12\%$ of sales$)$

R$216000$

Fixed administrative and marketing costs

R$96000$

Sales

R$1800000$