REQUIRED
Study the information provided below and answer the following questions:
If the sales managers proposal is rejected, calculate the total revenues at breakeven by using the
contribution margin ratio. marks
Calculate the additional expenditure that the company can afford to spend on advertising, in keeping with
the sales managers proposal. marks
Calculate the breakeven quantity if the sales managers proposal is accepted using the proposed new
selling price and the increase in the advertising outlay marks
INFORMATION
Denel Enterprises manufactures a product that sells for R each. The company presently produces and sells
units per year. Unit variable manufacturing expenses and variable selling expenses are R and
of the sales price respectively. Fixed costs are R for manufacturing overheads and R for
selling and administrative activities. The sales manager has proposed that the price be increased to R per
unit. To maintain the present sales volume, advertising must be increased. The companys profit objective is
of sales.
