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Maju Sdn Bhd operates a shirt store in Kuala Lumpur. The store carries many styles of shirts that are all sold at the same price.
Maju Sdn Bhd operates a shirt store in Kuala Lumpur. The store carries many styles of shirts that are all sold at the same price. To encourage sales personnel to be aggressive in their sales efforts, the company pays a substantial sales commission on each shirt sold. Sales personnel also receive a small basic salary. Below is the cost and revenue data for the store: Per shirt (RM) 50 Selling price Variable expenses: Invoice cost Sales commission Total variable expenses 18 8 26 Annual Fixed expenses: Rental Advertising Salaries Total fixed expenses 48,000 100,000 80,000 228,000 The company has approached you to analyse and review some its newly proposed policies. Required: (a) What is the annual breakeven point in sales (RM) and unit? (6 marks) (b) If the company set up a target to generate RM210,000 net profit in 2019, determine the number of shirts that need to be sold? (2 marks) 3/7 CQC7001 (c) The company is considering two proposals to improve its net profit in 2019. The first proposal is to reduce the sales commission paid to sales personnel to RM3 per shirt and the new fixed salaries will be RM95,000. The second proposal is to eliminate the sales commission paid to sales personnel and replace the current scheme with fixed monthly salaries. New fixed salaries will be RM130,000. Determine which proposal should be accepted if the expected units of shirts to be sold equal to your answer in part (b). Your decision must be supported with relevant computation showing the effect of both proposals on net profit. (8 marks) (d) Discuss TWO other non-financial implications that may occur as a result of implementing any of the new scheme in part (c) to the company
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