Question 2 Heng Bhd manufactures and sells their product Turbo Washer to the various dealers within the country. The budgeted production and sales per month is 7,000 washers. The selling price per unit of the washer is RM180.

The unit production cost is as follows:

Direct Materials - RM38

Direct Wages - RM44

Variable Wages - RM28

Fixed overheads - RM20

Required:

a. Calculate the break even in:

i. units (3 marks)

ii. value (2 marks)

iii. Calculate the sales quantity required to be sold to earn a profit of RM378,500 when the selling price per unit is reduced by 5%. (5 marks)

b. Differentiate a variable cost from a fixed cost and explain why the distinction between variable and fixed costs is important in cost accounting. (5 marks)