Question
Question 2 FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The normal annual production and sales for the
Question 2 FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The normal annual production and sales for the toys are 2,800 units, although the company has the capacity to produce up to 3,000 units. The following data consist of costs incurred during the year ended 2019: Material 100% variable 70,000 Labour 70% variable 80,000 Sellin ex enses 40% variable 58,000 Fixed administrative ex enses 50,000 The management accountant of the company is proposing the following alternatives to increase sales for the year 2020 and to reduce the idle capacity: 1. Reducing the selling price to RMIIO per unit which would lead to an estimated increase in the sales volume by 30%. 2. An increase in sales would result in an increase of variable labour cost per unit by 15%. 3. Fixed selling expenses is also expected to increase to RM32,500 due to an aggressive advertising and marketing campaign planned to boost sales. Required: a) Determine the following costs in year 2019: i. Total variable costs per unit. (2 marks) ii. Total fixed costs. (2 marks) b) Calculate the following in year 2019: Break-even points in units and in value. (5 marks) ii. Margin of safety in units and in value. (5 marks) iii. The expected sales value if the company targets for a profit of RMI 00,000. (5 marks) c) Advice the management of FunKids Sdn Bhd if the company should implement the proposed alternative for year 2020. (Show profit comparison). (6 marks) (
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