NK Sdn Bhd NK Sdn Bhd a social enterprise company incorporated in Malaysia with the mission to advocate healthy lifestyle. NNK Sdn Bhd has two main outbounds which are 6 pack mineral water and Customised Labeling mineral water. NEW INVESTMENT The company was established since 2012, and will be celebrating its 10th anniversary next year. With that in mind, the board of directors proposed that NK Sdn Bhd to introduce Smart water Apps. The new product will be known as e-water. In order to provide E-water, NK Sdn Bhd needs to invest on E-water development which cost RM200.000 with required rate of return of 20%. The details of the new product line is as follows: Year Initial Cost and Book Value Annual Net After Tax Annual Net Income 0123 $ Cash flows 200,000 $ 30,000 $ 18,000 $ 50,000 $ 30,000 $ 80,000 $ 48,000 160,000 $ 96,000 $ 200,000 $ 120,000 The financial year end for NK Sdn Bhd is December 31 every year. The company' Operational 4 5 flows is as follows: Main Operations Activities Inbound Bottle Bottle Cap Printed Label Process Outbound 6 bottles pack 500ml mineral water Water Labeling Packing Bottling Register Trial Period Subscription Re-ordering E-water (Planning Year 2022) Design Ordering for Labeling for 6 Packing Customized Labeling Water Bottle Printing pck Mineral Water Buuodding Activities General Administrative, Finance, Human Resource Marketing & Promotion Research & Development Information Technology & Infrastructure Planning & Budget for financial year 2022 For financial year 2021, Sales Department was assigned to achieve budgeted sales of 1,000,000 units and 30,000 subscribers respectively for 6pack Mineral Water and Customised Label. It is also assumed that the selling price, direct material and direct labour cost remains the same as prior period, however overhead has been identified as follows: Overhead Total Cost Cost Behavior*** Depreciation of Computer & Equipments* $300,000 Fixed Cost Depreciation of Building* $40,000 Fixed Cost Utilities* (Note A) $700,000 Semi Variable Cost Production cost (including water) ** $100,000 Variable Cost Maintenance & Upkeep of Applications and Software** $400,000 Variable Cost Indirect Labour $100,000 Fixed Cost Indirect Material $200,000 Variable Cost Other staff cost $200,000 Fixed Cost Marketing and promotion $30,000 Fixed Cost Research & Development $200,000 Fixed Cost General administrative expenses $230,000 Fixed Cost Training cost* $100,000 Fixed Cost *75% of the company's computer & equipment, building, and utilities devoted to main operation activities, the remaining 25% used for selling and administrative function. ** 100% of the company's maintenance and upkeep of Production Facility and applications & software is for main operation. *** Each overhead cost are allocated according to total sales of respective products. Note A - Utilities Ledger and Cost Driver Month Jan Feb Mar Apr Utilities Cost ($) Machine hours 30,000 10,000 40,000 15,000 50,000 18,000 70,000 25,000 May Jun 60,000 22,000 85,000 30,000 Jul 90,000 34,000 Aug 95,000 35,000 Sep 55,000 20,000 Oct 45,000 13,000 Nov 50,000 18,000 Dec 30,000 10,000 700,000 250,000 NK Sdn Bhd Accounting Records ending 31 December 2021. NK Sdn Bhd kept their financial records using cloud based accounting system, the following information was extracted. Based on Built of Material Dec 2020 summary. Each of 6pck Water Bottles 6 bottles, 6 bottle caps, 6 individual labels and 1 printed 6pck label. Cost of respective material are $0.50, $0.10, $0.20 per bottle. Furthermore, the summary also included direct labour cost per hour $30 per hour except designer's labour cost is $100 per hour. The Direct Labour hours for each unit (6pck Water bottles) taken by respective process. The processes are as follows: 6pck Water Bottle processes are as follows: Processes Direct Labour Hour Water Bottling Labeling Packing 5 minutes 3 minutes 2 minutes Customised Label processes are as follows: Processes Duration Design 2 hours Ordering Labeling Packing 30 minutes 3 minutes 2 minutes Production Head of Department also alerted CEO's office, that, the current facility maximum capacity for 6pck Mineral Water is at 1,100,000 unit. Furthermore, Services Department also identified the maximum capacity for Customised Labeling is only for 50,000 Subscriber per year. Selling price was $12.00 and $500 per unit for 6pck Mineral Water and Customised Labelling respectively. QUESTIONS: As an external consultant, you have been asked by Management of company to prepare a written briefing paper for their next Management meeting. NK Sdn Bhd profitability improved over the years. Management identified potential of expansion opportunities through introduction of new product line. Drawing upon research and current practice, you are asked to cover the following issues: 1. NK Sdn Bhd competitor VC Sdn Bhd provided the same services as the company. BOD identifying this issue, decides to analyse 6pck Water Bottle and Customized Labelling Management Costing Report for Financial Year End 2021. Analyse the Cost Volume Profit Analysis for financial year ending 31 December 2021 using your chosen costing statements by product and services (complete and/or excerpts whichever is relevant) (12 marks) 2. Analyse the cost behavior of direct and supporting overhead for financial year ending 31 December 2021 3. Appraise the New Investment using time invariant technique. (1 marks) (2 marks)