Bongani Limited manufactures a product that sells for R120. He manufactured and sold 12 500 units during the previous month. The following additional information, for this activity level, is available: Total direct material cost R281 250 Direct labour cost per hour R12 Direct labour hours needed per product 1 ½ Total variable manufacturing overheads R122 500 Sales commission (of the selling price) 2 ½ % Total fixed manufacturing overheads R360 000 Other fixed costs in total R420 000 Do the following calculations, according to the instructions given: Required: The workers at Bongani’s plant threaten to strike if they do not receive a pay increase of 10%. The sales people want a commission of 3%. The only supplier of the direct material has increased its price by 5% per unit. All other factors remain the same as for the current month. What influence will these actions have on the breakeven units and margin of safety ratio of Bongani? (b) Calculate Bongani’s net profit for the month after these actions. Compile a marginal income statement to present your answer.
Question 24
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Bongani Limited manufactures a product that sells for R120. He manufactured and sold 12 500 units during the previous month. The following additional information, for this activity level, is available:
Total direct material cost R281 250 Direct labour cost per hour R12 Direct labour hours needed per product 1 ½ Total variable manufacturing overheads R122 500 Sales commission (of the selling price) 2 ½ % Total fixed manufacturing overheads R360 000 Other fixed costs in total R420 000
Do the following calculations, according to the instructions given: Required: The workers at Bongani’s plant threaten to strike if they do not receive a pay increase of 10%. The sales people want a commission of 3%. The only supplier of the direct material has increased its price by 5% per unit. All other factors remain the same as for the current month. What influence will these actions have on the breakeven units and margin of safety ratio of Bongani? (b) Calculate Bongani’s net profit for the month after these actions. Compile a marginal income statement to present your answer.
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