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Risingson Ltd. manufactures and sells Watchful, a home security system. The selling price of Watchful is $150.00 per unit. The company's variable marketing expenses was
Risingson Ltd. manufactures and sells Watchful, a home security system. The selling price of Watchful is $150.00 per unit. The company's variable marketing expenses was $10.00 per unit. The cost incurred to manufacture the product includes direct materials per unit amounting to $35.50 and direct labour per unit of $25.00. The company also incurs variable manufacturing overhead of $19.50 per unit. The total annual fixed costs for the year 2020 was $1,650,000. The company sold 48,000 units for the year ended 2020. Ignore income tax considerations. Required: (a) How many units must Risingson sell in order to breakeven for the year 2020? What is the net profit of Risingson for the year 2020? (6 marks) (b) In 2021, Risingson plans to embark on some changes to its manufacturing processes. Due to this, its annual total fixed costs is expected to be $1,800,000. Risingson would need to increase the selling price of its product in order to continue to be profitable. It sets its new selling price at $160.00 per unit. The company has also set a targeted contribution margin of 45%. The management expects that an increase in the selling price would cause a decrease in the demand for its product. They estimate a decrease of 10% from the number of units sold in 2020 would result due to this change. What is Risingson's new variable cost per unit? What is the number of units that Risingson would need to sell in order to achieve a net profit equal to the net profit of 2020? Should the company proceed to change its manufacturing processes? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) (c) Refer to the original information (ie. ignore part (b) data). Assume now that there is a tax rate of 30%. How many units must Risingson sell in order to achieve a target profit after tax of $950,000. (3 marks) (d) Assume that a home security system company sells multiple products, what information, data, assumptions and predictions would the company require to formulate its strategies? (4 marks) () Explain the term 'decentralization' with an appropriate illustration. How it is responsibility accounting useful to an organization and how is related to goal / behavioural congruence? Explain your answer with an appropriate illustration
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