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Details of LCW Company's income statement for the past year are as follows: RM RM Sales (22 000 units) 1,320,000 Cost of sales: Direct materials
Details of LCW Company's income statement for the past year are as follows: RM RM Sales (22 000 units) 1,320,000 Cost of sales: Direct materials 440,000 Direct labour 396,000 Variable factory overhead 88,000 Fixed factory overhead 60,000 984,000 GROSS PROFIT 336,000 Variable selling expenses 132,000 Fixed selling and admin expenses 30,000 162,000 PROFIT BEFORE TAX 174,000 Income tax expense (30%) 30,000 PROFIT 121,800 Required: (Show all calculations) Consider each of the following independent situations: a) What is the company's break-even point in sales units and dollars? (2 marks) b) If the company wants to make an after tax profit of RM109,200 with income tax at 30%, what are the units and dollars level of sales necessary to reach its goal? (4 marks) c) Suppose the company decided to automate a production line. Explain what effects this would have on a company's cost structure using CVP terminology. Could these changes have any possible negative effect on the firm? (4 marks)
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