(a) LESCO manufacturing Company is in the process of purchasing an equipment to be used for the production of bricks whi

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A Lesco Manufacturing Company Is In The Process Of Purchasing An Equipment To Be Used For The Production Of Bricks Whi 1 (43.25 KiB) Viewed 59 times

(a) LESCO manufacturing Company is in the process of purchasing an equipment to be used for the production of bricks which costs M80, 000. The useful life of the equipment is estimated to be 5 years. Straight line depreciation will be used and salvaged value will be nil at the end of the five years. The expected income is M30, 000 per year before depreciation. Required: (i) Assuming a 40% tax rate and a discount rate of 15%, calculate the discounted payback period for the project. (10 marks) (b) Leslinyane (Pty) Ltd has projected revenue in Quarter 3 of 2016 to be M600 000, estimated variable costs of M400, 000 and estimated fixed costs of M150,000. Required: (i) Compute the contribution margin ratio or percentage (3 marks) (ii) Compute total revenues needed to break even. (3 marks) (iii) Compute total revenues needed to achieve a target operating income of M80,000 (3 marks) (iv) Compute total revenues needed to achieve a target net income of M120, 000 assuming the income tax rate is 35%. (6 marks) Total marks = (25 marks)