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QUESTION 2 (25 MARKS) Robert Ltd imports soccer boots from Malaysia. The selling price is Rs90 per pair of soccer boots (product A). The variable
QUESTION 2 (25 MARKS) Robert Ltd imports soccer boots from Malaysia. The selling price is Rs90 per pair of soccer boots (product A). The variable costs are Rs50 per pair. The fixed costs are RS200,000. The manager of the company seeks your help to achieve the best result for the company. He provides you with the following situations: (a) A one-off special order has been received by a customer, who is willing to buy 200 units (pairs of soccer boots) for Rs80 per unit. (b) This would require additional fixed costs of Rs5,000, the variable costs per unit remain the same. A new supplier has offered the company Rs40 per pair (product B). This would require additional quality checks and other increases of fixed costs by Rs52,000. This offer replaces the current position of product A. The company would have a selling price of Rs85 for product B. The market capacity is 9,000 units (pairs of soccer boots). You are required to: (1) Identify the break-even point in units (pairs of soccer boots) under the current position. (4 marks) Determine whether the special order should be accepted with the new customer. Show all calculations. (4 marks) (ii) (iii) Identify some of the problems that could be associated with completing the order mentioned at (ii). (3 marks) (iv) Determine whether the new supplier offer should be accepted. (4 marks) (v) Assuming either Products A or B are produced. Determine the break-even point in units and revenue so as to achieve a profit of Rs 150,000 each. (5 marks) (vi) Briefly discuss the business implications of the fixed cost structure
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