QUESTION

1. Plastica supplies eco-bag the brand name Packy. Its selling price is RM135 per unit and the variable cost for each unit is RM75. The fixed costs incurred for that particular month are as follows:

RM

Rental of machine 32,600

Workers' salaries 41,850

Delivery 37,750

a) Explain what contribution margin is and determine the contribution margin

per unit for Packy. (4m)

b) Calculate the break even point for Packy in unit and RM. (4m)

c) Due to the recent reduction of petrol price, the logistic manager has estimated a decrease of 20% of its delivery cost starting from October 2020. At the same time, the price of Packy will also reduce to RM110 per unit. Calculate the new break even point for Packy in unit and RM. (7m)

d) Discuss how cost-volume-profit analysis could assist the management of Plastica in making decisions. (5m)