he Coolest Cars Sdn. Bhd. manufactures a Ride on & Roll electric car for kids and supplies its product to well-known departmental stores across Malaysia. The company has just completed its first year of trading and its profit and loss account for the year is set out below:

	RM000	RM000
Sales (25,000 units)		13,750
(-) Direct Costs:
Direct materials	2,000
Direct labour	3,500
Direct expenses	1,125	6,625
		7,125
(-) Overheads:
Production	875
Administration	1,800
Selling	1,500	4,175
Net Profit		2,950

The following information is available:

a. all of the direct costs vary with production.

b. the production overhead figure includes RM500,000.00 of fixed costs. The remaining production overheads vary with production.

c. all of the administration overheads are fixed.

d. variable selling overheads are incurred at the rate of RM25.00 per unit. The remaining selling overheads are fixed.

Required:

Calculate:

i. the break-even point in units.

ii. The company has a capacity of 30,000 units per year. The management is optimizing about the future looks and consider an option to increase its market share for the coming year. The sales manager believed that unit volume would increase to 30,000 units if the selling price is reduced by RM50.00. In addition, the direct material cost would be reduced by 5% following a minor modification to the specification of the product. All other fixed costs and unit variable costs will remain unchanged for next year.

Calculate the break-even point in units if the company implement the above proposal.