QUESTION 2

Koko Disc Sdn Bhd (KDSB), manufactures and sells compact disc. Price and cost data are as follows:

	RM
Selling price per unit	25.00
Variable cost per unit
Direct Material	9.00
Direct labour	3.00
Manufacturing Overhead	2.00
Selling Expenses	1.00
Total Variable Cost per unit	15.00
Annual fixed costs
Manufacturing Overhead	192,000
Selling and administrative costs	276,000
Total Fixed Costs	468,000
Forecasted annual sales volume (120,000 units)	3,000,000

Required:

a.)Management estimates that direct-labour costs will increase by 10% next year. How many units KDSB have to sell next year to reach the current break-even point.

(5 marks)

b.)If KDSBs direct-labour costs do increase by 10%, calculate the new selling price that KDSB needs to charge in order to maintain the same contribution margin ratio as before.

(4 marks)

(Total: 9marks)