Question
Mika Sdn Bhd manufacture vase branded as Flora for local market. The following is the information on production cost and other expenses related to July
Mika Sdn Bhd manufacture vase branded as Flora for local market. The following is the information on production cost and other expenses related to July 2021.
| Details of cost elements | 2000 Units of Vases (RM) |
| Fixed Administration expenses | 4,500 |
| Indirect labour | 9,500 |
| Power | 1,000 |
| Fixed Rental | 1,400 |
| Selling and Distribution | 6,500 |
| Direct labour | 25,000 |
| Factory supplies | 2,500 |
| Direct materials | 50,000 |
| Total cost | 100,400 |
The averages selling price of the vase is RM50.20 per unit. The maximum capacity of the production is 10,000 vase per month.
- BEP
| Variable Cost | Amount (RM) | Per Unit |
| Indirect Labor | 9500 | 4.75 |
| Power | 1000 | 0.50 |
| Selling and Distribution | 6500 | 3.25 |
| Direct Labor | 25000 | 12.50 |
| Factory Supplies | 2500 | 1.25 |
| Direct Material | 50000 | 25.00 |
| Total Variable Cost | 94500 | 47.25 |
| Fixed Cost | Amount (RM) | |
| Fixed Rental | 1400 | |
| Fixed Administration Expenses | 4500 | |
| Total Fixed Cost | 5900 |
Break even point (in Units) = Fixed Cost = 5900
Sales Price Variable Cost 50.20 47.25
| BEP (Sale Value) | = | BEP (unit) x Selling price per unit | |
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| = | 2000 unit x RM 50.20 | |
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| = | RM 100,400 |
= 2000 Units
- Selling Price = RM 51.18
- Margin of safety
| Total variable cost (9500+1000+6500+25000+2500+50000) | = 94,500 |
| Number of units | = 2,000 |
| Variable cost per unit (94500/2000) | = 47.25 |
| Selling price per unit | = 50.20 |
| Contribution per unit (50.2-47.25) | = 2.95 |
| Total fixed cost (4500+1400) | = 5,900 |
| Break even point in units (5900/2.95) | = 2,000 units |
| Break even sales in RM (2000*50.20) | = 100,400 |
| Budgeted sales in RM (10000*50.20) | = 502,000 |
| Margin of safety in RM (502000-100400) | = 401,600 |
| Margin of safety in units (10000-2000) | = 8,000 units |
| Margin of safety in percentage (401600*100/502000) | = 80% |
Required:
The company is planning to introduce a new vase, Celica of which the selling price and variable cost of RM85.00 and RM45.00 respectively. The proposed production of Celica is 3,000 vases monthly and the sales mix of the Flora and Celica is planned at 60% (Floral) and 40% (Celica). The introduction of Celica in the market resulted the fixed cost increased by RM15,000.
(i) Construct a table showing cumulative profit for Flora and Celica.
(ii) Draw a multi-product profit volume chart (CVP chart) for these two vases.
(iii) Indicate the BEP (In units) on the chart drawn.
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