Litmus Pte Ltd is a distributor and retailer of traditional push scooters in Singapore. During the

year, the company expanded its product line to include electric bicycles (eBike) sourced from

external distributors. With the recent ban on electric scooters (eScooters) on footpaths, the

company expects eBikes sales to increase steadily in the next 2 years. The Board is hence

studying the feasibility of establishing its own production facility in Vietnam, where cost of

production is lower.

Before venturing abroad, the Board needs to address the issue of falling profitability of its

current product line. The following table provides the details of sales by product type:

Push Ebike- Ebike - scooter Standard Luxe Total Sales (units) 5,000 1,800 500 7,300 Selling price per unit $ 120 $ 600 $ 800 Variable cost per unit $ 30 $ 250 $ 350 $ $ $ $ Revenue 600,000 1,080,000 400,000 2,080,000 Variable costs (150,000) (450,000) (175,000) (775,000) 1,305,000 Contribution margin Net profit before tax 150,000