T-Square Ltd is a manufacturer of transformers for the energy sector. The company has developed a new, highly efficient and cost-effective transformer and is preparing to launch this new product in three weeks at an industrial show. The fixed cost associated with the manufacturing of this product is R250 000, while the variable manufacturing cost per unit is R1 540. The company intends selling this product for R2 800 per unit. The sales team provided three different sales scenarios. These scenarios are as follows: Scenario Sales (rand) Pessimistic 550 000 Expected 650 000 Optimistic 760 000 Additional information: The total variable costs for the three scenarios are R308 000, R390 000 and R470 000, respectively. 

Required Show all formulas and calculations and round off all calculations to the nearest whole number. 

Calculate the operating break-even point in units and in rand for this product. (5) 

5.4. Calculate the degree of operating leverage (DOL) if the estimated sales scenario changed as follows:

 5.4.1. From expected to pessimistic (10) 

5.4.2. From expected to optimistic (2)

Answer rating: 100% (QA)

To calculate the operating breakeven point in units we need to determine the number of units that ne... View the full answer