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Due to erratic sales of its sole product, a high-capacity battery of laptop computers, QRS Sdn Bhd has been experiencing difficulty for some time. The
Due to erratic sales of its sole product, a high-capacity battery of laptop computers, QRS Sdn Bhd has been experiencing difficulty for some time. The company's contribution format income statement for the recent month is given below: Sales (@ RM35 per unit) Variable Cost Contribution margin Fixed Cost Net Operating Loss Required: RM 717,500 574,000 143,500 148,000 (4,500) a) Compute the Company's contribution margin ratio and its break-even point in both units and RM. (5 marks) b) The Company's CEO believes that an RM8,000 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an RM70,000 increase in monthly sales. If the CEO is right, what will be the effect on the Company's monthly net operating income or loss? (5 marks) c) Refer to the original data. The sales manager is convinced that a 10% reduction in selling price, combined with an increase of RM8,000 in the monthly advertising budget, will cause unit sales to double. What will the new contribution format income statement look like if these changes are adopted? (5 marks) d) Refer to the original data. The marketing department thinks that a fancy new package for the laptop computer battery would help sales. The new package would increase packaging costs by 75 cents per unit. Assuming no other changes, how many units would have to be sold each month to earn a profit of RM9,750
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