QUESTION 2

WAIWAI Enterprise operate a retail outlet that sells goods direct to the public. Profit statements for the months of August and September 2019 are as follows:

Selling Price RM10

August 8000 Units

September 9000 Units

	August	September
Sales	80,000	90,000
Cost of sales	50,000	55,000
Gross profit	30,000	35,000
Less:
Selling and administration costs	8,000	9,000
Administration costs	15,000	15,000
Net profit	7,000	11,000

(a)	Use the high-low methods to identify the behaviour of:
	(i)	cost of sales;
	(ii)	selling and distribution costs;
	(iii)	administration costs.
		(12 marks)
(b)	Draw a contribution break-even chart and identify the monthly break-even sales value and area of contribution.
		(10 marks)
(c)	Assuming a margin of safety is 30% of the break-even value, calculate WAIWAI Enterprises annual profit.
		(2 marks)
(d)	WAIWAI Enterprise is considering opening another retail outlet selling the same products. WAIWAI Enterprise plans to use the same profit margins in both outlets and has estimated that the specific fixed costs of the second retail outlet will be RM100,000 per annum. WAIWAI Enterprise also expects that 10% of its annual sales from its existing outlet would transfer to this second outlet if it were to opened. Calculate the annual value of sales required from the new outlet in order to achieve the same annual profit as previously obtained from the single outlet.
		(10 marks)
(e)	Briefly describe the cost accounting requirements of organizations of this type.
	(6 marks)