CONFIDENTIAL 2 AC/MAR 2002/MAC260 Question 1 Shiddiq Bhd specializes in the installation of wrought iron railings. The following is the company's estimated profit statement for next year, which was prepared using marginal costing principle. Budgeted Profit Statement RM RM Sales 440,000 Less: Variable costs 102,000 Materials 140,000 242,000 Labour 198,000 Contribution Less: Fixed costs: 40,000 Administration 50,000 90,000 Selling and Distribution 108,000 Profit Two proposals are made in an attempt to improve next year's profit: Managing Director's proposal: Alternative material could be used, which will reduce the total material costs to RM80,000. However, this will increase fixed costs by RM24,000 to cover inspection of materials costs. A special machine cos