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Melon Company, a manufacturer of desks which has been established for more than years. As at December, 2018 the company has sold 2,400 units of
Melon Company, a manufacturer of desks which has been established for more than years. As at December, 2018 the company has sold 2,400 units of desks. The sales price of each desk is RM40 per unit. The variable cost to produce one desk is RM15 per unit. Fixed costs for the desk production is RM20,000. Required: a) Compute the variable cost ratio and contribution margin ratio. b) Compute the breakeven unit and sales. c) Calculate the number of desk Melon Company needs to sell in order to achieve a profit of RM100,000 per annum. d) Using the contribution margin ratio computed in (a), compute additional profit that Melon Company would earn if sales were RM20,000 more than expected. e) For the projected level of sales, compute the margin of safety in units and ringgit. f) Calculate the degree of operating leverage. Now suppose that Melon Company revises the forecast to show a 20 percent increases in sales over the original forecast. What is the percent change in operating income expected for the revised forecast? What is the total operating income expected by Melon Company after revising the sales forecast
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