QUESTION 5 (20 MARKS) The Florence Chocolatier is a new entrant in the market for premium chocolates. As a school break is approaching, the company introduces a new product 'Choco-Lava'. This chocolate is wrapped in an aluminium foil and packed in an attractive packet containing 50 pieces. This packet is used as the basic sales unit. Although management had made detailed estimates of costs and volumes prior to undertaking this venture, new projection based on actual cost experience is now required. Income statements for the last two quarters show the costs and productive efficiency that the company can expect in the next few quarters. There are no inventories on hand at the end of each quarter. The income statements reveal the following: Quarter 3 (RM) Quarter 4 (RM) Sales - Quarter 3: 50,000 packets 2,750,000.00 4,4000,000.00 - Quarter 4: 80,000 packets (-) Cost of Goods Sold (950,000.00) (1,400,000.00) Gross Margin 1,800,000.00 3,000,000.00 (-) Selling and Administration 1, 150,000.00 1,690,000.00 Net income 650,000.00 1,310,000.00 The variable production overheads are RM15.00 per packet and the variable selling and administration are RM18.00. REQUIRED: a. Determine the break-even point in terms of packet sales for 'Choco-Lava'. [5 Marks] b. Management estimates that there is an investment of RM3,000,000.00 in this product line. What quarterly packet sales and breakeven revenue are required to earn a return of 20% per annum on investment? Ignore income tax and inflation. [4 Marks] c. The Florence Chocolatier marketing team predict that if the selling price is reduced by RM1.50 per packet and a RM150,000.00 advertising campaign among school children is mounted, sales will increase by 20% over the fourth quarter sales. Compute the revenues earned if the management proceed with the proposed plan. Should the management continues with the proposed plan? [5 Marks]