ABC Sdn Bhd is a social enterprise company incorporated in Malaysia. The mission of the company is to advocate quality education and empower inclusiveness in education. ABC has three main products and services which are e-writing, e-reading, and e-teaching for primary school students. The company was established since 2010, and will be celebrating its 10th anniversary next year. With that in mind, the board of directors proposed that ABC to open a branch in Kota Kinabalu in January 2021. Currently, the company operates in Bangi with its own manufacturing, trading, services, and administrative facilities. The financial year end for ABC Sdn Bhd is December 31 every year.

ABC Sdn Bhd Accounting Records ending 31 December 2019.
ABC kept their financial records using cloud based accounting system, the following information was extracted. Based on Built of Material Dec 2019 summary, weighted average cost of Tablets is $200 per piece, E-pencil $50 per piece, Writing module $40 per unit and Reading module $30 per unit. Furthermore, the summary also included hours taken by operators to install software, assemble the products, pack, and check for quality which are 1 hour, 30 minutes, 15 minutes, 15 minutes respectively for every 5 units. Each operator hourly rate is $20. Another Service Report Summary consists of information on e-teaching activities, which are preview 45 minutes, registration for participating in e-teaching 15 minutes, teaching 8 hours, assessment 2 hours respectively for 50 pax. Each trainer or teacher is paid at $350 per hour. Selling Price per unit for E-Writing and E-Reading are $450 and $350 respectively, while e-teaching subscription fee is $150 per student. Production Head of Department also alerted CEO’s office that, the current facility maximum capacity for E-Writing and E-Reading is at 500,000 unit each. Furthermore, Services Department also identified the maximum capacity for E-teaching is only for 13,000 pax per year.

Planning & Budget for financial year 2020
For financial year 2020, Sales Department was assigned to achieve budgeted sales of 150,000 units and 300,000 units, and 9,000 online subscription respectively for E-writing, E-reading, and E-teaching. It is also assumed that the selling price, direct material and direct labour cost remains the same as prior period, however overhead has been identified as follows:
Depreciation of Computer & Equipment for production** $600,000
Maintenance & Upkeep of Production Facility*** $1,500,000
Marketing and promotion $1,800,000
Indirect Material $1,000,000
Other staff cost $2,500,000
Research & Development $800,000
General administrative expenses $450,000
Training cost $7,000,000
Utilities* $5,000,000
Indirect Labour $480,000
Depreciation of Building* $1,000,000

*75% of the company building and utilities devoted to production activities, the remaining 25%
used for selling and administrative function.
** Number of Computer & Equipment setup for E-Writing and E-Reading are 240 and 720
respectively.
***Maintenance and Upkeep of Production Facility monthly budgeted amount are as follows:

Month	Maintenance & Upkeep of Production Facility	Cost Driver - No. of Machine hours
Jan	$114,150	75,000
Feb	$117,000	78,000
Mar	$120,500	80,000
Apr	$127,000	92,000
May	$128,000	98,000
Jun	$131,000	108,000
Jul	$134,350	118,000
Aug	$134,000	112,000
Sep	$126,000	95,000
Oct	$125,000	90,000
Nov	$120,000	85,000
Dec	$123,000	90,000

Kota Kinabalu branch planning for financial year 2021

In analyzing the runway proposal, the Board has decided to use a 5-year time horizon. ABC Sdn Bhd hurdle rate for capital project is 12%. Other data is as follows:

Cost of acquiring additional computer & equipment	$700,000
Cost of computer & equipment installation	$298,400
Annual cost of maintaining Kota Kinabalu Facilities	$280,000
Annual incremental revenue from Kota Kinablu	$700,000
Cost of commissioning	$396,000
Annual Operating cost	$120,000
Cost of factory facilities	$2,000,000
Annual Net After Tax Cash flow for:
Year 1	$300,000
Year 2	$350,000
Year 3	$400,000
Year 4	$450,000
Year 5	$500,000

QUESTIONS: As an external consultant, you have been asked by Board of Directors of company to prepare a written briefing paper for their next Board meeting. ABC Sdn Bhd profitability improved over the years. Board of Directors identified potential of expansion opportunities through expansion of a new branch in Kota Kinabalu. Drawing upon research and current practice, you are asked to cover the following issues:

1. Analyse ABC Sdn Bhd budgeted profitability for financial year ending 31 December 2020 using your chosen profitability budgeting by product and services (complete and/or excerpts whichever is relevant)

2. Analyse the cost behavior of Maintenance & Upkeep of Production Facility and CVP analysis for financial year ending 31 December 2020.

3. Analyse appraisal on investment for production to be placed at Kota Kinabalu branch.