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Question 2 Border Sdn. Bhd. is a company producing and selling biscuits called Beautifully Crafted Biscuits. Market research shows that the company could sell
Question 2 Border Sdn. Bhd. is a company producing and selling biscuits called "Beautifully Crafted Biscuits". Market research shows that the company could sell at least 100,000 packets per month at a selling price of RM5.00 per packet. For each packet sold, the manager is confident of getting 10% contribution margin. The following fixed costs are expected to be incurred during October 2019: Rent Wages and salaries General expenses RM 10,000 13,000 2,000 For production purposes, the company needs to use the following assets. The depreciation rates for the assets are as follows: Cost Delivery van Office equipment Required: Depreciation RM40,000 RM20,000 Rate 20% per annum 10% per annum a) Identify in details the total fixed costs for product "Beautifully Crafted Biscuits". b) Determine: (9 marks) i. Whether the company can achieve the breakeven point at the current sales level. (4 marks) ii. The new selling price if the company plans to breakeven at the sales level of 65,000 packets per month. (4 marks) c) The company believes that by spending an extra of RM8,500 per month on advertising, it will increase the sales by 30,000 packets per month. Advice whether the company should implement the plan based on profitability. (8 marks)
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