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Mahmoud agreed with Abyr's proposal and reminded the family that this decision will come with an opportunity cost. The meeting concluded with Mahmoud taking the

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Mahmoud agreed with Abyr's proposal and reminded the family that this decision will come with an opportunity cost. The meeting concluded with Mahmoud taking the task of reworking the forecasts based on these new constraints and determining the opportunity cost of Abyr's proposal. Your task Assume the role of Mahmoud as the Business graduate expert in managerial accounting and be prepared to discuss your findings with the BDB shareholders. Answer the following questions: 1. Given the disruption & shortage of supply of RAG there was a concern whether the company will be able to breakeven or not in the 1* quarter of 2018. Calculate the break- even point for the first quarter of 2018 before and after the disruption. Do you expect the breakeven point to change? Why? Show you computations. 2. Based on the given constraints (limited supply of raw agave), prepare a revised production & sale schedule that maximizes profit for BDB. Ensure you prepare a contribution margin format income statement that supports your recommended production schedule. 3. Do you agree with Mahmoud that the decision they make of producing and selling a minimum of 20,000 units of each product has an opportunity cost? (L.e. how much profit is BDB foregoing, if any, with the decision of serving all three group of customers in the way Abyr suggested?) If you agree, how much? How do you think BDB may reduce this opportunity cost? 4. In the process of accounting for the unit costs, Mahmoud allocated the fixed production overhead costs among the units produced equally. What do you think of this method? When would you recommend it & when you would not? Explain. 5. In the following quarter, assuming the supply will be abundant, and production may be increased to compensate for the loss of the 1: quarter, how much sales BDB needs to make to achieve a target profit of 1, 680,000 AED. Assume the sales mix of last year

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