The following budgeted information for the year ended 31 July 2022 is provided by Word Limited,...

Transcribed Image Text:

The following budgeted information for the year ended 31 July 2022 is provided by Word Limited, a manufacturer of a single product called "Microsoft": Sales (30 000 units X R10 per unit) R300 000 Total variable cost (30 000 units X R4,50 per unit) R135 000 Total fixed costs R65 000 Net profit R100 000 The sales forecast is 20% less than the actual sales for the year ended 31 July 2021. The sales director produced three proposals to improve the position: Proposal 1. involves launching an aggressive marketing campaign. This would involve a single additional fixed cost of R15 000 for advertising. Sales commission will increase by R1 per unit. Sales volume is expected to increase by 10% above the budgeted sales of 30 000 units with no change in the unit selling price. Proposal 2 involves a 10% reduction in the unit selling price. Fixed selling overheads will also reduce by R10 000. The sales volume is expected to be 33 000 units. Proposal 3 involves a 5% reduction in the unit selling price and this is estimated to bring the sales volume back to the level as the year ended 31 July 2021. For each of the three proposals, calculate the: 3.1.1 Change in profits compared to the budgeted figures 3.1 (13 marks) 3.1.2 Break-even quantity (answer expressed to the nearest whole number) (12 marks) The following budgeted information for the year ended 31 July 2022 is provided by Word Limited, a manufacturer of a single product called "Microsoft": Sales (30 000 units X R10 per unit) R300 000 Total variable cost (30 000 units X R4,50 per unit) R135 000 Total fixed costs R65 000 Net profit R100 000 The sales forecast is 20% less than the actual sales for the year ended 31 July 2021. The sales director produced three proposals to improve the position: Proposal 1. involves launching an aggressive marketing campaign. This would involve a single additional fixed cost of R15 000 for advertising. Sales commission will increase by R1 per unit. Sales volume is expected to increase by 10% above the budgeted sales of 30 000 units with no change in the unit selling price. Proposal 2 involves a 10% reduction in the unit selling price. Fixed selling overheads will also reduce by R10 000. The sales volume is expected to be 33 000 units. Proposal 3 involves a 5% reduction in the unit selling price and this is estimated to bring the sales volume back to the level as the year ended 31 July 2021. For each of the three proposals, calculate the: 3.1.1 Change in profits compared to the budgeted figures 3.1 (13 marks) 3.1.2 Break-even quantity (answer expressed to the nearest whole number) (12 marks)

Answer rating: 100% (QA)

Answer Step by Step Explanation Proposal 1 New estimated fixed cost 65000 15000 80000 Variable Cost ... View the full answer