MAC3701
Assignment 2 Semester 2 2026
Unique number:
Due date: 15 September 2026
PART A
A-a Budgeted margin of safety per vehicle
Treatment note: the assessment table contains a manufacturing-overhead line of R35 000 for Urban and R52
000 for Explorer, while Note 1.7 separately states variable manufacturing overheads of R20 000 per vehicle and
fixed manufacturing overheads absorbed at R125 000 per vehicle. For the CVP calculation below, the detailed
split in Note 1.7 is applied and the R35 000/R52 000 line is not added again, because doing so would double-
count manufacturing overheads.
Details Urban Explorer
Selling price R450 000.00 R700 000.00
Vehicle body R125 000.00 R187 500.00
Lithium-ion battery packs R90 000.00 R135 000.00
Electronic control systems R40 000.00 R50 000.00
Other direct materials R20 000.00 R30 000.00
Direct labour R12 000.00 R18 000.00
Variable manufacturing overheads R20 000.00 R20 000.00
Variable selling and distribution costs: 4% of sales R18 000.00 R28 000.00
Total variable cost per vehicle R325 000.00 R468 500.00
Contribution per vehicle R125 000.00 R231 500.00
, PART A
A-a Budgeted margin of safety per vehicle
Treatment note: the assessment table contains a manufacturing-overhead line of R35 000 for Urban and R52
000 for Explorer, while Note 1.7 separately states variable manufacturing overheads of R20 000 per vehicle and
fixed manufacturing overheads absorbed at R125 000 per vehicle. For the CVP calculation below, the detailed
split in Note 1.7 is applied and the R35 000/R52 000 line is not added again, because doing so would double-
count manufacturing overheads.
Details Urban Explorer
Selling price R450 000.00 R700 000.00
Vehicle body R125 000.00 R187 500.00
Lithium-ion battery packs R90 000.00 R135 000.00
Electronic control systems R40 000.00 R50 000.00
Other direct materials R20 000.00 R30 000.00
Direct labour R12 000.00 R18 000.00
Variable manufacturing overheads R20 000.00 R20 000.00
Variable selling and distribution costs: 4% of sales R18 000.00 R28 000.00
Total variable cost per vehicle R325 000.00 R468 500.00
Contribution per vehicle R125 000.00 R231 500.00
Fixed-cost calculation Amount
Total sales revenue: (300 × R450 000) + (200 × R700 000) R275 000 000.00
Variable selling and distribution costs: 4% × total sales R11 000 000.00
Fixed selling and distribution costs: R28 110 000 – variable portion R17 110 000.00
Fixed manufacturing overheads: 500 vehicles × R125 000 R62 500 000.00
Total fixed costs R79 610 000.00
Calculation Working
Budgeted sales mix 300 : 200 = 3 : 2
Contribution from one standard batch (3 × R125 000.00) + (2 × R231 500.00) = R838 000.00
Break-even batches R79 610 000.00 ÷ R838 000.00 = 95.00 batches
Break-even Urban vehicles 95.00 × 3 = 285.00
Break-even Explorer vehicles 95.00 × 2 = 190.00
Vehicle Budgeted sales units Break-even units Margin of safety units Margin of safety %
Urban 300.00 285.00 15.00 5.00%
Explorer 200.00 190.00 10.00 5.00%
Answer: the budgeted margin of safety is 15 Urban vehicles and 10 Explorer vehicles,
equal to 5.00% of budgeted sales for each model.
A-b(i) Ethical issue and business-related risks
Ethical issue
Assignment 2 Semester 2 2026
Unique number:
Due date: 15 September 2026
PART A
A-a Budgeted margin of safety per vehicle
Treatment note: the assessment table contains a manufacturing-overhead line of R35 000 for Urban and R52
000 for Explorer, while Note 1.7 separately states variable manufacturing overheads of R20 000 per vehicle and
fixed manufacturing overheads absorbed at R125 000 per vehicle. For the CVP calculation below, the detailed
split in Note 1.7 is applied and the R35 000/R52 000 line is not added again, because doing so would double-
count manufacturing overheads.
Details Urban Explorer
Selling price R450 000.00 R700 000.00
Vehicle body R125 000.00 R187 500.00
Lithium-ion battery packs R90 000.00 R135 000.00
Electronic control systems R40 000.00 R50 000.00
Other direct materials R20 000.00 R30 000.00
Direct labour R12 000.00 R18 000.00
Variable manufacturing overheads R20 000.00 R20 000.00
Variable selling and distribution costs: 4% of sales R18 000.00 R28 000.00
Total variable cost per vehicle R325 000.00 R468 500.00
Contribution per vehicle R125 000.00 R231 500.00
, PART A
A-a Budgeted margin of safety per vehicle
Treatment note: the assessment table contains a manufacturing-overhead line of R35 000 for Urban and R52
000 for Explorer, while Note 1.7 separately states variable manufacturing overheads of R20 000 per vehicle and
fixed manufacturing overheads absorbed at R125 000 per vehicle. For the CVP calculation below, the detailed
split in Note 1.7 is applied and the R35 000/R52 000 line is not added again, because doing so would double-
count manufacturing overheads.
Details Urban Explorer
Selling price R450 000.00 R700 000.00
Vehicle body R125 000.00 R187 500.00
Lithium-ion battery packs R90 000.00 R135 000.00
Electronic control systems R40 000.00 R50 000.00
Other direct materials R20 000.00 R30 000.00
Direct labour R12 000.00 R18 000.00
Variable manufacturing overheads R20 000.00 R20 000.00
Variable selling and distribution costs: 4% of sales R18 000.00 R28 000.00
Total variable cost per vehicle R325 000.00 R468 500.00
Contribution per vehicle R125 000.00 R231 500.00
Fixed-cost calculation Amount
Total sales revenue: (300 × R450 000) + (200 × R700 000) R275 000 000.00
Variable selling and distribution costs: 4% × total sales R11 000 000.00
Fixed selling and distribution costs: R28 110 000 – variable portion R17 110 000.00
Fixed manufacturing overheads: 500 vehicles × R125 000 R62 500 000.00
Total fixed costs R79 610 000.00
Calculation Working
Budgeted sales mix 300 : 200 = 3 : 2
Contribution from one standard batch (3 × R125 000.00) + (2 × R231 500.00) = R838 000.00
Break-even batches R79 610 000.00 ÷ R838 000.00 = 95.00 batches
Break-even Urban vehicles 95.00 × 3 = 285.00
Break-even Explorer vehicles 95.00 × 2 = 190.00
Vehicle Budgeted sales units Break-even units Margin of safety units Margin of safety %
Urban 300.00 285.00 15.00 5.00%
Explorer 200.00 190.00 10.00 5.00%
Answer: the budgeted margin of safety is 15 Urban vehicles and 10 Explorer vehicles,
equal to 5.00% of budgeted sales for each model.
A-b(i) Ethical issue and business-related risks
Ethical issue
