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Sioar. Harapan Industries produces thin limestone sheets used for cosmetic facing on buildings. The following income statement represents the operating results for the year just
Sioar. Harapan Industries produces thin limestone sheets used for cosmetic facing on buildings. The following income statement represents the operating results for the year just ended. The company had sales of 1,800 tonnes during the year. The manufacturing capacity of the firm's facilities is 3,000 tonnes per year. (Ignore income taxes). Sinar Harapan Industries Income Statement For the Year Ended December 31, 2021 RM 900,000 Sales Variable costs: Manufacturing Selling costs Total variable costs Contribution margin RM 315,000 180,000 RM 495.000 RM 405,000 Fixed costs: Manufacturing Selling Administrative Total fixed costs Net income RM 100.000 107.500 40.000 RM 247,500 RM 157.500 Required: 1 1. Supar Harapan plans to market its product in a new territory. Management estimates that an advertising and promotion programme costing RM61,500 annually would be needed for the next two or three years. In addition, a RM25 per tonne sales commission to the sales force in the new territory, over and above the current commission, would be required. How many tonnes would have to be sold in the new territory to maintain the firm's current net income? Assume that sales and costs will continue as 2021 in the firm's established territories. 2. Management is considering replacing its labour-intensive process with an automated production system. This would result in an increase of RM58,500 annually in fixed manufacturing costs. The variable manufacturing costs would decrease by RM25 per tonne. Compute the new break-even volume in tonnes and in sales ringgit 3. Ignore the facts presented in requirement 5. Assume that management estimates that the selling price per tonne would decline by 10 percent next year. Variable costs would increase by RM40 per tonne, and fixed costs would not change. What sales volume in dollars would be required to earn a net income of RM94.500 next year
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