QUESTION $3$

$(25$ MARKS$)$

REQUIRED

Study the information provided by the child welfare organisation and answer the following questions independently. The expanded contribution margin model must be used to answer questions $3\mathrm{.}1,3\mathrm{.}2$ and $3\mathrm{.}4.$

$3\mathrm{.}1$

Calculate the break$-$even quantity.

$(5$ marks$)$

$3\mathrm{.}2$

Calculate the sales volume required to achieve an operating profit of R$2112000.$

$(5$ marks$)$

$3\mathrm{.}3$

Calculate the selling price per unit $($expressed to the nearest cent$)$ that will enable to welfare organisation to achieve an operating profit of R$50$ per unit.

$(5$ marks$)$

$3\mathrm{.}4$

Suppose the selling price is decreased by R$20$ per unit with the expectation that this would increase the sales volume by $20\%.$ Is this a good idea? Motivate your answer with the relevant calculations.

$(5$ marks$)$

$3\mathrm{.}5$

Calculate the margin of safety $($in units$)$ if the selling price drops to R$110$ per unit with the expectation that the fixed costs can be reduced to R$711900.$

$(5$ marks$)$