(i) Domco makes and sells a single product, Product P. It is currently producing 112,000 units per month, and is operati

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(i) Domco makes and sells a single product,Product P. It is currently producing 112,000 units per month, andis operating at 80% of full capacity. Total monthly costs at thecurrent level of capacity are R611,000. At 100% capacity, totalmonthly costs would be R695,000. Fixed costs would be the same permonth at all levels of capacity between 85% and 100%.At the normal selling price for Product P, the contribution/salesratio is 60%.A new customer has offered to buy 25,000 units of Product P eachmonth, at 20% below the normal selling price. Domco estimates thatfor every five units that it sells to this customer, it will loseone unit of its current monthly sales to other customers.Required:a) Calculate the variable cost per unit of Product P andtotal fixed costs per month.b) Calculate the current normal sales price per unit, and thecontribution per unit at this price.c) Calculate the effect on total profit each month of accepting thenew customer’s offer, and selling 25,000 units per month to thiscustomer. Recommend whether the customer’s offer should beaccepted. .(ii) A contract is under consideration which wouldrequire 1,400 hours of direct labour. There is spare capacity of500 hours of direct labour, due to the cancellation of anotherorder by a customer. The other time would have to be found byasking employees to work in the evenings and at weekends, whichwould be paid at 50% above the normal hourly rate of R15.Alternatively, the additional hours could be found by switchinglabour from other work which earns a contribution of R5 perhour.Required:Calculate the relevant cost of direct labour if thecontract is accepted and undertaken.(5marks)