Wa-africa Ltd makes leather purses which it sells in the local market. It has drawn up the following budget for its next financial period:
Selling price per unit
Shs 116.00
Variable production cost per unit
Shs 34.00
Sales commission
5% of selling price
Fixed production costs
Shs 4,305,000
Fixed selling and administration costs
Shs 1,981,500
Sales
90 000 units
Required
i.) The margin of safety represents?
ii.) If the marketing manager has indicated that an increase in the selling price to Shs 122.50 per unit would not affect the number of units sold, provided that the sales commission is increased to 8% of the selling price, determine how these changes will affect the break-even point (to the nearest whole number)?

Answer rating: 100% (QA)

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