QUESTION ONE

$(25$ Marks$)$

ABC Company, a manufacturer of electronic gadgets, is considering a new product line. The company provided the following information for the analysis:

Fixed Costs: R$500,000$

Direct Material per Unit: R$12$

Direct Labour per Unit: R$6$

Variable Selling Cost per Unit: R$2$

Selling Price per Unit: R$50$

Expected Sales Volume: $30,000$ units

$1\mathrm{.}1$ Calculate the Break$-$Even Point in Units.

$(5)$

$1\mathrm{.}2$ Determine the Break$-$Even Value.

$(5)$

$1\mathrm{.}3$ Calculate the Net Profit at the Expected Sales Volume.

$(5)$

$1\mathrm{.}4$ The company renegotiates supplier contracts, reducing variable manufacturing costs by $R2$ per unit.

Recalculate the Break$-$Even Point in Units and Break$-$Even Value.

$1\mathrm{.}5$ Discuss the implications of the break$-$even analysis and suggest strategies for improving profitability.

$(5)$