Reference no: EM132730432

Question - Waltons Manufacturers commenced business on 02 January 2020, manufacturing plastic chairs. However, later in the year the management and investors decided to discontinue the manufacture of chairs with effect from 01 February 2021 and to start to manufacture tables instead. The budget preparation for 2021 has already commenced and the forecasts for January and February 2021 are available. The forecasts to undertake a CVP analysis for January 2021 and income statement using the absorption costing method for February 2021.

Required - Calculate the break-even value using the marginal income ratio.

1. The sales manager proposes a R2 per unit reduction in selling price with the expectation that this would increase sales by 2 000 units. Is this a good idea? Motivate your answer.

2. Determine the selling price per unit if a net profit of R486 000 is desired.