QUESTIONS $3[8$ Marks$]$

Using the information provided below, answer the following question.

INFORMATION

Lum$$ Gems $($Lum$)$ is an innovative manufacturer of modern jewellery in a Southern African Country.

Based on the results of an extensive market research, the finance manager has established a target

selling price of R$7400$ for a newly developed necklace. Lum$$ has estimated total sales volume of $35000$

units of the necklace across the African Continental Free Trade Area $($AfCFTA$).$ Lum$$ has set a target

profit margin of $30\%.$

Informed by the data gathered so far, the finance manager has projected the following:

Production costs per unit R

Direct material $1570$

Direct labour $875$

Direct machining and polishing $760$

Machinery set$-$up $185$

Inspection and testing $410$

Total non$-$production costs R

Design $($salaries and technology$)37500000$

Marketing consultants $5300000$

Distribution $6600000$

REQUIRED:

$3\mathrm{.}1.$Determine the projected cost gap per unit of the new necklace. $(5)$

$3\mathrm{.}2.$Through a comprehensive review of cost and management accounting literature, explore three viable

strategies to mitigate the cost gap identified in $3\mathrm{.}1($Please ensure to include relevant in$-$text citations

to substantiate your analysis$).(3)$