FAC2602 ASSIGNMENT 1 FIRST SEMESTER 2026 DUE 19 MARCH 2026 COMPLETE ANSWERS DISTINCTION GUARANTEED

FAC2602 SOLUTIONS




Question 1 (a) Solution
UrbanKick Sports Limited (UKS): Expected Operating Profit Including Nova X9

1. Expected Operating Profit from Existing Operations
Expected operating profit is calculated as the probability-weighted average:

Operating profit (R) Probability Expected value (R)

1,600,000 20% 320,000

1,700,000 30% 510,000

1,800,000 40% 720,000

2,000,000 10% 200,000

Expected operating profit (existing) = R1,750,000

2. Expected Operating Profit from Nova X9
Step 1: Expected annual production quantity

Quantity (pairs) Probability Weighted quantity

9,000 30% 2,700

12,500 40% 5,000

15,000 20% 3,000

18,500 10% 1,850

Expected annual production quantity = 12,550 pairs

Step 2: Selling price and variable cost per pair

Selling price = R880 per pair; Variable cost per pair = R755 (Direct material 480 + Direct
labour 220 + Variable overhead 55)

Step 3: Expected revenue, variable costs and contribution

, Expected revenue = 12,550 × R880 = R11,044,000

Expected variable costs = 12,550 × R755 = R9,475,250

Contribution = R11,044,000 − R9,475,250 = R1,568,750

Step 4: Subtract annual fixed costs

Fixed costs = R450,000

Expected operating profit from Nova X9 = R1,118,750

3. Total Expected Operating Profit (Existing + Nova X9)
Total expected operating profit = R1,750,000 + R1,118,750 = R2,868,750

FINAL ANSWER: R2,868,750