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

RM

The selling price is 45.00 a piece

Raw Material 17.00 a piece

Tailor Salary 20.00 a piece

Sewing Machine Depreciation 1,800

Factory Rental 24,000

Tailor Bonus 16,600

Annual sales 630,000 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:

1. 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.

2. 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.

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

(PRIVIDE ANSWERS WITH FORMULA.THANK YOU)