QUESTION 3A Premium Cha Co. manufactures high-quality porcelain tea sets. The company plans to introduce its new tea set - Golden; next year. The following cost information pertains to the budgeted production and sales of 10,000 sets of Golden: Direct materials per set (2 kg nt RM30 per kg) Direct Inbour per set (2 hours at RMIO per hour) Variable selling and administrative cost per set RM60.00 RM20.00 RM6.00 Manufacturing overhead rate: Variable RM8 per direct Inbour hour Fixed RM12 per direct labour hour RM20,000 Fixed selling and administrative costs The company is contemplating what price to charge for Golden Currently, there is a comparable tea set in the market, which sells for RM145 per set. Required: 1. Compute the break-even price of Golden (2 marks) 2. Suppose the company uses cost-plus pricing method to price Golden. Determine whether the unit selling price of Golden meets the competitive sales price if the company desires: a. 25% mark-up on absorption cost. b. b. 20% mark-up on total cost. (6 marks) 3. Suppose the company uses target costing and desires to meet the competitive sales price. a. Determine the unit cost of Golden at the competitive sales price while maintaining the same percentage of profit on sales as is earned in Requirement 2(a). b. b. Would the current cost of the company meet the target cost? Explain. (5 marks) QUESTION 3B AA Airlines provide service to 30 cities around the world. The Operation Manager of AA Airlines is trying to decide whether to introduce a new discount fare. Currently, a 134-seat 737 airplane on average has 75 passengers per flight. The regular fares produce an average revenue of RM0.15 per passenger mile. Unlike regular fare, a discount fare is subject to restrictions regarding time of departure and length of stay, which is not the most preferred option for many. However, budget travellers especially, would find the lower price attractive. The proposal suggests that a discount fare of 40% will produce three new additional passengers. Also, three of the previously committed passengers will switch to the discount fare from the regular fare