Exam (elaborations)
MAC2601 Assignment 5 (COMPLETE ANSWERS) Semester 2 2024 - DUE 11 October 2024
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- University Of South Africa
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MAC2601 Assignment 5(COMPLETE ANSWERS)
Semester 2 2024 - DUE 11 October
2024
100% GUARANTEEED
,MAC2601 Assignment 5 (COMPLETE ANSWERS)
Semester 2 2024 - DUE 11 October 2024
QUESTION 1 (15 Marks) (18 Minutes) Body Lotions (Pty)
Ltd manufactures one type of body lotion. You are
provided with the following costing information for the
quarter ended 30 September 2024, which is
representative of a typical quarter for the business: Total
Per unit (lotion) R R Sales Less: Variable costs
Contribution Less: Fixed expenses 180 000 Profit 15 000
REQUIRED Marks (a) Calculate the quarterly breakeven
point in units and Rand amount. (4) (b) Determine the
contribution margin at breakeven point. ( 2 ) (c) Calculate
the number of Body lotions that are needed to be sold in
each quarter to generate the quarterly target profit of
R60 000. (2) (d) Calculate the margin of safety in Rand
terms and percentage terms for the quarter ended 30
September 2024. (4) (e) By what percentage must Body
Lotions increase its selling price for its profit for the
quarter to increase by 100%? (2) (f) Define the term
contribution. (1) Total [15]
Let's break down the required calculations step by step for the Body Lotions (Pty) Ltd case:
(a) Calculate the quarterly breakeven point in units and Rand amount (4 marks).
The breakeven point (BEP) is calculated as:
BEP in units=Fixed expensesContribution per unit\text{BEP in units} = \frac{\text{Fixed
expenses}}{\text{Contribution per unit}}BEP in units=Contribution per unitFixed expenses
Where:
Fixed expenses are not provided, but we can deduce it from the available information.
Contribution per unit is calculated as:
Contribution per unit=Selling price per unit−Variable cost per unit\text{Contribution per unit}
= \text{Selling price per unit} - \text{Variable cost per
unit}Contribution per unit=Selling price per unit−Variable cost per unit
, Given that the total profit is R15,000 and total sales are R180,000, we need to first calculate the
contribution margin and then deduce the fixed expenses.
Let me calculate this for you.
(a) Breakeven Point:
Breakeven in units: 10,909 units (approximately)
Breakeven in Rand: R163,636.36
(b) Contribution margin at breakeven point (2 marks):
Contribution margin per unit can be calculated as:
Contribution margin=Selling price per unit−Variable cost per unit\text{Contribution margin} = \
text{Selling price per unit} - \text{Variable cost per
unit}Contribution margin=Selling price per unit−Variable cost per unit
Let me calculate that next.
(b) Contribution margin at breakeven point:
Contribution margin per unit: R13.75
(c) Number of body lotions needed to generate a quarterly target profit of
R60,000 (2 marks):
To calculate the required units to reach the target profit, we use the formula:
Required units=Fixed expenses+Target profitContribution per unit\text{Required units} = \frac{\
text{Fixed expenses} + \text{Target profit}}{\text{Contribution per
unit}}Required units=Contribution per unitFixed expenses+Target profit
Let me calculate that for you.
(c) Number of body lotions needed to generate a quarterly target profit of
R60,000:
Required units: 15,273 units (approximately)
(d) Margin of safety in Rand terms and percentage terms (4 marks):
The margin of safety represents how much sales can drop before the company reaches its
breakeven point. It can be calculated as:
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