Question 1

Relax Pte Ltd produced and sold 37,500 luxury scented candles during the year 2022 at $80 per unit. Total fixed cost was $900,000 while variable cost was $50 per unit.

Question 1a

Determine the breakeven point in units and in $.

Question 1b

Compute the margin of safety in $ and in %.

Question 1c

The company is planning to use a new material throughout 2023. This will reduce variable costs by 10%. Fixed costs are expected to remain unchanged.

As the factory's output is nearing its annual output capacity of 38,000 units, the company plans to increase the selling price by 5%. This will decrease sales volume by 20%.

Use cost-volume-profit analysis to determine whether the company should proceed with the plan.