Question
ABC Sdn Bhds profit plan for the year of 2019 is summarized below: Items RM RM Sales (20,000 units) 1,000,000 Manufacturing costs: Material 85,000 Labour
ABC Sdn Bhds profit plan for the year of 2019 is summarized below:
Items | RM | RM |
Sales (20,000 units) |
| 1,000,000 |
Manufacturing costs: |
|
|
Material | 85,000 |
|
Labour | 80,000 |
|
Fixed overhead | 132,500 |
|
Variable overhead | 202,500 |
|
|
|
|
Distribution costs: |
|
|
Fixed | 170,000 |
|
Variable | 95,000 |
|
|
|
|
Administration costs: |
|
|
Fixed | 87,500 |
|
Variable | 17,500 |
|
|
|
|
Total costs |
| 870,000 |
|
|
|
Profit before tax |
| 130,000 |
Determine the following:
(i) Compute the variable cost ratio and the P/V (contribution margin) ratio.
(6 marks)
(ii) What is the breakeven point in RM? In units? (8 marks)
(iii) Calculate margin of safety in RM & %. (5 marks)
(iv) Assume that the management is considering revising the sales price downward by 10%. The price decrease is expected to bring about a 20% increase in sales volume.
- Is the revised price a better alternative? (show calculation). (4 marks)
- What is the new breakeven point in units & in RM ? (8 marks)
- What is the new margin of safety in RM & in % ? (6 marks)
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