2 (CVP Analysis) -10% Tikasa Sdn Bhd manufactures volleyballs. The company has a ball that sells for RM25. At present, the ball is manufactured in a small plant that relies heavily on direct labour workers. Thus variable cost are high, totaling RM15 per ball, of which 60% is direct labor cost. Last year company sold 30,000 of these balls, with the following result. Sales (30,000 balls) Variable expenses Contribution margin Fixed expenses Net operating income Required: RM750,000 450.000 300,000 210.000 90,000 a) Calculate the contribution margin ratio and the break-even sales in balls. (2 Marks) b) Due to an increase in labour rates, the company estimates that variable costs will increase by RM3 per ball next year. If this change takes place and the selling price per ball remains constants at RM25, what will the new contribution margin ration and balls? Marks) the break-even sales in (10 c) Refer to the data in (b) above. i) If the expected change in variable costs takes place, how many balls will have to be sold next year to earn the same net operating income as last year? in The president fells that the company must raise the selling price of its volleyballs. If the company wants to maintain the same contribution margin ratio as last year, what selling price per ball must it charge next year to cover the increased labour cost? (10 Marks) Refer original data. The company is discussing the construction of a new automated manufacturing plant. The new plant would slash variable cost per ball by 40%, but it would cause fixed costs per year to double. If the new plant is built, what would be the company's new contribution margin ratio and the break- even sales in balls? Marks) (8