Maureen is currently looking into a business opportunity that will require her to manufacture branded match T‐shirts for a local cricket club. Although she thinks it might be a good opportunity, she is a bit wary of accepting the contract as her free time is limited and she will only be able to produce 100 T‐shirts per month. T‐shirts will be sold at R200 each to club members. © The Independent Institute of Education (Pty) Ltd 2020 Page 7 of 11 19; 20 2020 The costs associated with the opportunity are as follows. Description Cost of material for T‐shirt Cost of printing Labour costs Variable overhead costs Fixed overhead costs Required: Costs R40 per shirt R5 per shirt R25 per shirt R10 per shirt R15 000 per month Calculate the break even point in units and advise Maureen whether she should take up the opportunity or not. Provide a reason for your answer.

Question

Maureen is currently looking into a business opportunity that will require her to manufacture branded match T‐shirts for a local cricket club. Although she thinks it might be a good opportunity, she is a bit wary of accepting the contract as her free time is limited and she will only be able to produce 100 T‐shirts per month.
T‐shirts will be sold at R200 each to club members.
© The Independent Institute of Education (Pty) Ltd 2020
Page 7 of 11

19; 20 2020
The costs associated with the opportunity are as follows.
Description
Cost of material for T‐shirt Cost of printing
Labour costs
Variable overhead costs Fixed overhead costs
Required:
Costs
R40 per shirt
R5 per shirt
R25 per shirt
R10 per shirt
R15 000 per month
Calculate the break even point in units and advise Maureen whether she should take up the opportunity or not. Provide a reason for your answer.

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