Maureen is currently looking into a business opportunity that will require her to manufacture branded match T‐shirts for a local cricket club. Although she thinks it might be a good opportunity, she is a bit wary of accepting the contract as her free time is limited and she will only be able to produce 100 T‐shirts per month. T‐shirts will be sold at R200 each to club members. The costs associated with the opportunity are as follows. Description Costs Cost of material for T‐shirt R40 per shirt Cost of printing R5 per shirt Labour costs R25 per shirt Variable overhead costs R10 per shirt Fixed overhead costs R15 000 per month Required: Calculate the break even point in units and advise Maureen whether she should take up the opportunity or not. Provide a reason for your answer
Maureen is currently looking into a business opportunity that will require her to
manufacture branded match T‐shirts for a local cricket club. Although she thinks it
might be a good opportunity, she is a bit wary of accepting the contract as her free
time is limited and she will only be able to produce 100 T‐shirts per month.
T‐shirts will be sold at R200 each to club members.
The costs associated with the opportunity are as follows.
Description Costs
Cost of material for T‐shirt R40 per shirt
Cost of printing R5 per shirt
Labour costs R25 per shirt
Variable overhead costs R10 per shirt
Fixed overhead costs R15 000 per month
Required:
Calculate the break even point in units and advise Maureen whether she should
take up the opportunity or not. Provide a reason for your answer.
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