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Calculate the operating profit for electro limited

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Reference no: EM132908089

Question - Electro Limited expects to manufacture and sell 20 000 circuit breakers and 8 000 distributor boards. The following information is provided:

Unit selling price for Circuit Breakers is 450 and 315 Unit variable cost.

Unit selling price for distribution boards is 1200 and 700 Unit variable cost.

Total fixed costs are expected to amount to R2 400 000.

REQUIRED -

1. Calculate the operating profit for Electro Limited using the contribution margin approach.

2. The marketing manager has suggested increasing production of distributor boards to 16 000 units and decreasing production of circuit breakers to 10 000 units. This operational change will increase fixed costs to R4 200 000.

Calculate the operating profit if this suggestion is implemented and advise Electro if this should be done.

Reference no: EM132908089

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