MA2 : COST VOLUME PROFIT ANALYSIS

Wangl Sdn Bhd mal-ies only one product which is budgeted to have a standard variable unit cost of RM55.00. The award year's budget for mating and selling 20,000 units, includes the following data: RM Fixed ovelheald costs: Factory 1,400,000 Administration 400300 Selling and distribution 300300 Total contribution 2.400300 The managing director is not satised with the present volume of output and budgeted annual profit. He wants a minimum annual profit of RM500.000 and believes that it is possible to increase the quantity sold by 20% as a direct result of spending RM200.000 on television advertising. At this increased level 01 output, fixed factory overhead would increase by PIP-130.003 and xed selling and distribution costs would increase by RM201000. Required: [Each question is to be treated independently) {a} Using the current years budgeted data only. calculate: it The annual prot. ii. The selling price per unit ill. Break-even point [in unltand value) iv. Margin of safety [In unit and value) {marital (0} Evaluate the managing director's suggestions and calculate: i. The amount by which selling price per unit could be reduced to obtain the annual profit. {a meme) ii. The revised break-even point (in units and value] and the margln orthe safety (In unite and value; on the assumption that the selling once is reduoed as M (b) (I) above. {4 made)