Question 1

Angsaemas Sdn Bhd manufactures a single product known as "Goldfish". The manager of Angsaemas Sdn Bhd is interested with the performance of "Goldfish". He is given the following information for the year 2018 that is based on 50,000 units of production and sales.

i.Selling price of Goldfish is RM50.

ii.Direct cost is RM20.40 per unit.

iii.Manufacturing overhead for the year 2018 is RM350,000. (The variable cost is RM100,000).

iv.Selling overhead is RM220,000. This is a fixed cost with the exception of commission that is 5% of the sales value.

v.General overhead is RM250,000. (The variable cost is RM80,000)

Required:

a)For the year 2019, direct cost is expected to decrease by RM1.50. Production and sales units will increase by 20%. Calculate the followings and show all your workings.

i.The break-even point (in unit and sales value).

(7 marks)

ii.The margin of safety (in unit).

(2 marks)

iii.Profit or loss if the sales volume is 39,375.

(3 marks)

iv.Number of units that need to be sold if the required profit is RM120,000.

(4 marks)

b)Referring to (a) above, the company intends to implement new marketing strategy to increase the sales in the following year. If the marketing strategy is implemented, the company needs to hire an additional salesperson at a fixed salary of RM12,000 per year and the company needs to spend an additional RM5 per unit on material. The selling price is to be increased to RM55.

Required:

Calculate:

i.The breakeven point (in units and value)

(6 marks)

ii. Budgeted sales (in units) if margin of safety is 20,000 units.

(4 marks)

c)Explain the breakeven point and margin of safety.

(2 marks)

[Total: 28 marks]