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Lebo Ndlovu (“LN”) is has a small online fabric shop specialising in dressmakin...
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Lebo Ndlovu (“LN”) is has a small online fabric shop specialising in dressmaking fabrics. She sells two types of fabric, measured and sold per metre. She has asked for your assistance with the management accounting aspects of her business and provided you with the following budgeted information:
Details
|
Cotton
|
Premium Linen
|
Total
|
|
R
|
R
|
R
|
Annual Target Profit
|
|
|
120 000
|
Selling Price per meter
|
120
|
180
|
|
Fabric Purchase cost per meter
|
60
|
90
|
|
Labour cost per hour
|
48
|
48
|
|
Variable cutting and packaging cost per meter
|
8
|
12
|
|
Monthly shop rental
|
|
|
3 600
|
Monthly utilities
|
|
|
1 200
|
Monthly insurance
|
|
|
900
|
Monthly Website hosting
|
|
|
750
|
Additional Information:
· For every 1 metre of premium linen sold, LN expects to sell 3 metres of cotton fabric.
· Cotton Fabric requires 4 minutes of labour per meter, and Premium Linen Fabric requires 6 minutes of labour
· Variable selling cost are 2,5% of the selling price
Assume the following additional information for this question only:
· Total annual fixed costs R86 400
· Contribution to sales ratio: Cotton 45% and Premium Linen 55%
· Expected sales mix is 2:5
Using the weighted average contribution margin method. The break-even sales value of LN is (rounded to the nearest rand) ____________