Q2.XYZ Co. has the following income statement:

Sales (10,000 units @ Nu 10) 1, 00,000

Less VC (@4) 40,000

Contribution margin 60,000

Fixed costs 25,000

Net income 35,000

Required:

1. Company is considering of switching
2. Nu10, 000 of fixed costs to variable costs
3. Nu 10,000 of variable costs to fixed costs

If company does that, then show the effect on its net income. Also, comment whether such change shows any significant change on Net income with appropriate reasoning. (4)

1. Find the effect on Company's net income of changing fixed to variable costs or variable costs to fixed costs as sales volume increases by 10%. (4)

1. Also, comment on management efficiency of FC and VC by company in relation to morale and corporate climate of company. (2)