QUESTION 3 Gombak Roda (GR) sells bicycles in Selangor. The shop has expanded their varieties of bicycles they sold. The following is the expected sales and cost in RM) for the month according to the types of bicycles sold in Gombak Roda: Road bikes Folding bikes Mountain Total (RB) (FB) bikes (MTB) 50 20 9 30 % 100 300,000 100 120.000 100 180,000 100 600,000 159.000 53 80,000 67 84.000 47 323.000 100 54 Percentage of total sales Sales (RM) Variable expenses (RM) Contribution margin (RM) Budgeted sales units 141.000 47 40.000 33 96,000 46 53 277,000 1.500 Gombak Roda's net operating income is budgeted at RM65,000 for the month and the estimated break even sales is RM535,000. Fixed expenses are RM212,000 Apparently, for the current month the actual sales was RM750,000, higher than the budgeted sales. The actual sales by product were: Road bike (RB) RM180,000: Folding bike (FB) RM270,000, and Mountain bike (MTB) RM300,000. Due to the pandemic, the Restricted Movement Control Order (RMCO) in the country has badly affected the economy as well as the country. On the other hand, since the borders between countries were still closed, many people had opted to maximise their time with new hobbies. Where among the hobbies is, cycling. There has been an increase in the demand on special orders for MTB with additional features. The special order has reached to 100 bicycles. These special orders will be sold for RM550 per unit. These extra modifications would consist of brackets to hold radios, mobile phones and other gear. These modifications would require RM140 of incremental variable costs. In addition, Gombak Roda would have to pay a fixed RM24,000 to welders, in order to design and cut special alloy brackets for these additional gadgets This is a one-time order that would not affect the company's regular business. Under normal circumstances, the variable expenses consist of manufacturing cost only Required: a. Prepare a contribution format income statement for the month based on the actual sales (without special orders). (Round up to zero decimal). (4 marks) b. Consider that Gombak Roda has met its RM750,000 sales for the month. The owner of Gombak Roda was surprised to see the results shown in the income statement as prepared in Requirement (a). Provide your brief explanation on why the net operating income/loss and the break-even point in RM (Ringgit Malaysia) are different from what was budgeted. (4 marks) c. At the end of the current month, some renovation works, and repairs will be carried out in the store, hence limiting the current space area. The store can only accommodate 1,000 bicycles at one time. Based on the current actual sales, which type of bicycle should Gombak Roda give priority to put in the store for next month's sale and identify the number of bicycles that should be put in the store. Explain your answer. (Round up to zero decimal). (6 marks) d. Calculate the financial advantage (or disadvantage) of the special order. (4 marks) e. Refer to your answer in Requirement. Should Gombak Roda accept the special order? Justify your answer. (5 marks) f. If Gombak Roda determines to take the special orders, how can the company make profit from it? Briefly explain your answer. (2 marks) [TOTAL: 25 MARKSI
