Hazalann Manufacturing Inc. (HMI) is suffering from the effects of increased local and global competition for its main product, a lawn mower that is sold in discount stores throughout Malaysia. The following table shows the results of HMI's operations for 2013. Sales (11,000 units @ RM90) RM990,000 Less variable costs (11,000 @ RM 63) 693,000 Contribution margin RM297,000 Less fixed costs 324.000 Operating profit(loss) RM (27,000) Required: 1) Compute HMI's breakeven point in units. (1 mark) 2) What would be the required sales, in units, to generate a profit of RM30,000 ? (1 mark) 3) Prepare a contribution income statement as a check for your calculations in requirement 2 above. (2 marks) 4) What is a cost structure? Discuss and calculate the cost structure of the firm and the firm operating leverage from 3 above. If there is a 20% increase in sales, how many percent of income will increase? (4 marks) 5) Refer to the original data. The manager believes that a RM 60,000 increase in advertising would result in a RM 135,000 increase in annual sales. In your opinion do you think the manager is right? (4 marks) 6) Refer to the original data. The vice president in charge of sales feels that a 10% reduction in price in combination with a RM50,000 increase in advertising will cause unit sales to increase by 20%. What effect would this strategy have on operating profit (loss)? Explain whether the company should proceed with this strategy (4 marks) 7) Refer to the original data. During 2013, HMI saved RM5 of unit variable costs per lawn mower by buying from a different manufacturer. However, the cost of changing the plant machinery to accommodate the new part cost an additional RM30,000 in fixed cost per year. Was this a wise change? Why or why not? (4 marks) [Total: 20 Marks) Show transcribed image text