QUESTION 3

In 2020, Oriental Company sold 800 units at RM500 each. Variable costs were RM250 per unit, and fixed costs were RM200,000. The selling price is expected to increase by 10% for 2021 and unit sold is 1,250 units. Oriental Company is tentatively planning to invest in equipment that would increase fixed costs to RM255,000, while decreasing variable costs per unit by 12%.

Instructions

(a) Compute the break-even point in Ringgit Malaysia (RM) for the year 2020 by using mathematical equation. (Show all workings). (4 marks)

(b) Compute the break-even point in Ringgit Malaysia (RM) for the year 2021 by using mathematical equation. (Shows all workings). (6 marks)

(c) Compute the total sales in Ringgit Malaysia (RM) that the company need to generate, if the company wish to earn net income of RM900,000 in the year 2021 by using mathematical equation. (Shows all workings). (6 marks)

(d) Compute margin of safety in Ringgit Malaysia (RM) and in ratio for the year 2021. (Show all workings). (4 marks)