Maju Bhd manufactures a single product known as Azeneca Machine for the use in chemical processing industry. For the year 2021 the company managed to sell 1800 units of Azeneca Machine. The company sell its product at RM42 each that normally generates 56% of contribution margin. Annual fixed cost is normally estimated to be RM255,000.

Required.

1. To increase sales by 15% higher, the company will reduce the salary of the sales force by RM6000 per month and increase their sales commission by RM3.50 per unit.

2. To reduce selling price by 15%, it will increase sales by 25%. In addition, the company will incur additional marketing expenses of RM4,500 per month.

By comparing the computed net profit with the current net profit, which proposed would you suggest the company to adopt? Why?

(9 marks)

2. Refer to original data. For the coming year, the company is planning to produce another type of machine, named Sivonam Machine. It can be sold for RM 35 per unit with the unit variable cost of RM22. Since both machines will share the same production bay, an additional RM75,000 of fixed cost is necessary to produce both machines. The demand for Azeneca Machine is expected to remain constant while demand for Sivonam Machine is expected to be 12,000 units for the first year. Determine the companys breakeven point in units and value for each machine and in total, if it decides to produce both machines as planned.

(6 marks)

e) One of the Cost-Volume Profit analysis assumptions is that sales mix is constant. Comment on this assumption.

(4 marks)

(Total: 25 marks)