Mr. Fil runs a small company by sewing clothes. He has provided the following information:

RM

The selling price is45.00 a piece

Raw Material17.00 a piece

Tailor Salary20.00 a piece

Sewing Machine Depreciation 1,800

Factory Rental24,000

Tailor Bonus16,600

Annual sales630,000 sheets

(Output capacity 14,000 sheets)

He said there was a bonus agreement with the tailor to encourage the tailor to work diligently. Therefore, bonus payments are unavoidable.

He also lists the following strategies to consider:

Strategy I: Increase Sales

He will advertise his factory sewing products and reduce the selling price of a shirt by RM2.00. Advertising costs amount to RM12, 000 and sales are expected to increase to 18,000 pieces.

Strategy II: Increasing Production Capacity

He will buy a new machine that is more efficient at a cost of RM10, 000. The variable cost per unit is expected to decrease to RM34.00 per piece. This machine will be depreciated at an annual rate of 10%. Sales and sales units remain the same (i.e. 14,000 pieces) and two production supervisors with a monthly salary of RM1, 200 each will also be taken.

You must calculate fixed costs, changes and selling prices in each strategy before determining profitability.

He asks for your views to determine strategies that will maximize profits for his business.

(PROVIDE ANSWERS WITH FORMULA.THANK YOU)