Question

1. Calculate the selling price per handbag

2. Calculate the breakeven (in number) of handbags sold

3. Calculate the number of handbags to be sold if the company wants to earn a profit after tax of 10% of the total sales.

You have the following information

leather	2 meter per handbag	Leather being imported at a cost of R 9, 200 per 150 m roll
Labour Cutting and stitching of material Supervisory salary	3 hours per handbag R9,500 per month	Labour rate is R75,00 per hour
Import cost		R1200 per load of 4 rolls of leather
Delivery cost		R1500 per load. A load consists of 16 bags
Accounting salary	R8,500 per month
Rent	R5,000 per month	Rent is being allocated according to floor space 75% of floor space is occupied by the production department
Admin cost	R10, 500 per month
Depreciation		The company has two sewing machines at a cost of R8 560 per machine. Depreciation is calculated at 20% per annum straight line

Additional notes:

The selling price is calculated as markup of 150% on variable costs per unit.

Tax rate is 30%

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
1.
		Variable Cost per Unit R
Leather	9200/150*2	122.67
Labor	75*3	225.00
Import Cost	1200/600*2	4.00
Delivery Cost	1500/16	93.75
Total Variable Cost		445.42
Mark Up	150%*22720.42	668.13
Selling Price		1,113.54
2.
BEP	Fixed Cost/Contribution Margin
	33642.67/668.13	51	handbags
Fixed Cost:
Supervisory salary		9,500.00
Accounting Salary		8,500.00
Rent		5,000.00
Admin Cost		10,500.00
Depreciation	8560*20%*1/12	142.67
Total Fixed Cost		33,642.67
3.
Let unit to be sold is X.
Contribution Margin	668x
Less: Fixed Cost	33,643
Profit before tax	668x-33643
Profit After tax	(668x-33643)*0.7
Desited Profit After Tax	1114x*0.10
Hence
(668x-33643)*0.7=	1114x*0.10
467.6x-23550	111.4x
467.6x-111.4x	23550
356.2x	23550
x=	23550/356.2
x=	66.11
Hence unit to be sold	66.11