Question 1

Kipas Sdn Bhd produces ceiling fans, and is currently operating at 95% of its capacity of 100,000 fans per month. The company has just received a one-time special order from Hong Kong Trading to purchase 5,000 fans at RM110 per unit. If Kipas choose to accept this order, it has to incur an additional fixed printing cost of RM50,000 for the packaging material. The data provided is as follows:

Monthly Data

Units produced and sold

95,000

Normal selling price/unit

RM150

Variable cost/unit

RM80

Total fixed cost

RM3,500,000

Required:

i.)Will your answer change if Hong Kong Trading want to purchase 9,000 units instead of 5,000 units?

ii.)What is the price that Kipas should set for this special order? Support your answer with appropriate calculation.