Question
Adam and his friend, Akmal, are both talented painters. Last year, they started painting postcards which they gave to their friends as a gift. After
Adam and his friend, Akmal, are both talented painters. Last year, they started painting postcards which they gave to their friends as a gift. After that, they began selling those postcards at a craft fair and sold them for fun. At the last fair, a buyer who really liked the postcards and offered them the contract to paint 500 postcards of a specific design for a price of RM2,000. With the increase in demand, Adam and Akmal decided to open a business and named it as 4A Craft. Each postcard priced at RM4.00. Variable operating costs amounted to RM1.50 per postcard. To produce the postcards for the contract, they have to buy a specific machine for cutting the postcard, which cost the amount of RM700.
i)Solve for 4A Crafts operating breakeven point value.
ii)Solve for of 4A Crafts EBIT value of that contract.
iii)If Adam decides to renegotiate the contract at the price of RM5.00 per postcard, solve for the new value of EBIT.
iv)If the buyer refuses to pay more than RM4.00 per postcard, but willing to negotiate on the quantity, identify the quantity of postcards through proper calculation that will result in the EBIT value of RM1,200.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started