Required a) Calculate at the three (3) different production levels of: • 15 000 units (current level of production) • 20 000 units, • 12 000 units i. The variable manufacturing cost per unit, ii. The fixed manufacturing cost per unit, iii. The total manufacturing cost per unit. b) Why is there a difference in the unit cost? Discuss briefly c) Assume the company produces and sell 20 000 units, and wishes to make a net profit of R10 per unit. What would be the expected selling price per unit?
QUESTION 3 (17)
Mvete Limited is an established company in the manufacturing industry. The company is manufacturing a very successful product, namely Vete12. The following cost structure is given to you, the newly appointed Trainee Cost
At the current level of 15 000 units produced and sold:
Direct material R20 per unit
Direct labour R375 000
Indirect material R5 per unit
Indirect labour (includes the production supervisors’ salary of R240 000. The remainder is R5.50 per unit R352 500
Other manufacturing overheads (all variable) R12.50 per unit
Selling and administrative expenses:
• Variable selling expenses R10.25 per unit
• Fixed selling expenses R5 per unit
• Administrative expenses (all fixed) R7 per unit
Required
a) Calculate at the three (3) different production levels of:
• 15 000 units (current level of production)
• 20 000 units,
• 12 000 units
i. The variable
ii. The fixed manufacturing cost per unit,
iii. The total manufacturing cost per unit.
b) Why is there a difference in the unit cost? Discuss briefly
c) Assume the company produces and sell 20 000 units, and wishes to make a net profit of R10 per unit. What would be the expected selling price per unit?
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