Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factory produces office chairs. Management aims to increase production in the coming year to

image text in transcribedimage text in transcribedimage text in transcribed

Prominent Sdn Bhd produces furniture at several factories. Its Seberang Prai factory produces office chairs. Management aims to increase production in the coming year to 800 units per month. Therefore, management is exploring two production strategies for the coming year. The first strategy is to continue operations with the existing machine, Machine A, and the second strategy is to rent a new machine, Machine B, to produce the office chairs. The monthly rental of Machine B is RM14,000. Machine B takes half an hour to produce one office chair. However, it requires a more skilled labour force with an hourly rate of RM30 per hour. Comparatively, continuing to use Machine A means that costs will remain the same. Machine A is 5 years old and is operating below capacity. The hourly labour rate is RM20 and the materials required for each unit is RM30. Each office chair is assembled within an hour. Each unit of the finished office chair is sold for RM120.The fixed monthly running costs of the factory is RM21,000. a) Your task is to calculate break-even point in units, break-even point in RM (round to the nearest RM), unit contribution margin for each strategy. 10 marks Note: State all relevant formulas in your assessment of the strategies

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting The Ultimate Guide To Accounting Principles

Authors: Greg Shields

1st Edition

1722964839, 978-1722964832

More Books

Students also viewed these Accounting questions