Question

Calculate the selling price per handbag and Calculate the breakeven point of handbags sold

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

Solution:

Compuatation of variable cost per unit of handbag
Particulars	Per unit
Leather (9200/150*2)	122.67
Labor (3*75)	225.00
Import cost (1200/600*2)	4.00
Delivery cost (1500/16)	93.75
Variable cost per unit	445.42

Selling price per unit = Variable cost per unit + 150% of variable cost per unit

= $445.42 + $445.42*150% = $1,113.55 per handbag

Annual fixed cost = ($9,500*12) + ($8,500*12) + ($5,000*12) + ($10,500*12) + (8560*2*20%) = $405,424

Contribution margin per unit = $1,113.54 - $445.42 = $668.12

Breakeven point in nos of handbag sold = Fixed cost / Contribution margin per unit = $405,424 / $668.12 = 607 handbags