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Determine how many units will have to be sold to meet target

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Reference no: EM132598424

MZANZI Company Ltd manufactures and sells a telephone answering machine. The company's contribution format income statement for the most recent year is given below:

Total Per Unit % sales

Sales (units = 50000) R3,000,000 R60 100

Less variable expenses R2,250,000 R45 ?

Contribution margin R 750,000 R15 ?

Less fixed expenses R 500,000

Net income R 250,000

Management is anxious to improve the company's profit performance and has asked for several items of information.

Required:

Question 1: Compute the company's contribution margin ratio and variable expense ratio.

Question 2: Compute the break-even point in both units and rands.

Question 3: Assume that sales increase by R1,250,000 next year. If cost behaviour patterns remain unchanged, by how much will the company's net income increase?

Question 4:  Refer to the original data. Assume that next year management wants the company to earn a minimum profit of R200,000. How many units will have to be sold to meet this target profit?

Question 5: Calculate the margin of safety ratio.

Reference no: EM132598424

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