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b. Kelam Sari Trading manufactures and sells hand-painted 'Batik' clothing. Their product called 'Ollumia' is a comfortable Kaftan that sells for RM145 per unit. The
b. Kelam Sari Trading manufactures and sells hand-painted 'Batik' clothing. Their product called 'Ollumia' is a comfortable Kaftan that sells for RM145 per unit. The budgeted production and sales for the month of April 2022 is 15,000 units. The cost data for the Kaftan are as follows: Variable cost per unit: Direct material - Cloth Direct labour Variable manufacturing overheads Variable selling and distribution overheads TOTAL RM 20 36 15 12 83 Fixed cost (per month): Fixed manufacturing overheads Fixed selling and distribution overheads TOTAL RM 335,400 263,000 598,400 Required: (Note: You are required to consider the following questions independently) s and in value. iv. The CEO of Kelam Sari Trading believes that by increasing the selling price to RM165 per unit and reducing the monthly total fixed costs by 20%, the monthly net profit will increase. Is the CEO's opinion correct? Show your detailed calculations. v. If Kelam Sari Trading wants to earn a minimum net profit of RM450,000, calculate the selling price should it charge to achieve the desired net profit. vi. The company's sales manager wants to reduce the selling price by 10%. He believes that this will enable the company to break-even at 8,000 units. Should this change be made? Other costs remain unchanged. Comment on the effect of the change in selling price on the company's break-even point (in units). (15 marks) (Total:20 marks)
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