BREAK-EVEN ANALYSIS

Question 5 a) Selcor Company manufactures and sells a new telephone model for high radiation environments. The company's contribution format income statement for the most recent year is given below: i. Required: ii. iii. Sales (25,400 units) Variable expenses Contribution iv. Total, RM 3,048,000 2,159,000 889,000 Fixed expenses 580,000 Net operating income 309,000 Per unit, RM 120 85 35 Calculate the break-even point in unit and value. Calculate the margin of safety in unit and value. (3 marks) (3 marks) In an effort to increase sales and profits, management is considering the use of a higher- quality speaker. The higher-quality speaker would increase variable costs by RM5 per unit, but management could eliminate one quality inspector who is paid a salary of RM35,000 per year. The sales manager estimates that the higher-quality speaker would increase annual sales by at least 20%. Calculate the new break-even point in unit and value. (4 marks) Assuming that changes are made as describes in (c), calculate the new margin of safety. Would you recommend that the changes be made