Soalan/Question 1:

Tres Sakti Berhad produces combination shampoos and conditioners in individual-use bottles for hotels. Each bottle sells for RM0.36. The variable costs for each bottle (materials, labour, and overhead) total RM0.27. The total fixed costs are RM54,000. During the most recent year, 830,000 bottles were sold. The president of Tres Sakti Berhad, not fully satisfied with the profit performance of the shampoo, was considering the following options to increase profitability: 1) increase promotional spending; 2) increase the quality of the ingredients and, simultaneously, increase the selling price; 3) increase the selling price; and 4) combinations of the three.

Dikehendaki/Required:

1.

The sales manager is confident that an advertising campaign could increase sales volume by 50%. If the company presidents goal is to increase this years profits by 50% over last years, what is the maximum amount that can be spent on advertising?

(5 markah/marks)

2.

Assume that the company has a plan to imprint the name of the purchasing hotel on each bottle. This will increase variable costs to RM0.30. How much must the selling price be increased, to maintain the same break-even point?

(3 markah/marks)

3.

The company has decided to increase its selling price to RM0.40. The sales volume drops from 830,000 to 700,000 bottles. Was the decision to increase the price a good one? Compute the sales volume that would be needed at the new price for the company to earn the same profit last year.

(5 markah/marks)

4.

Explain how CVP analysis can be used for managerial planning.

(2 markah/marks)

(Jumlah/Total: 15 markah/marks)