Softel Sdn Bhd produces and sells mobile products. A new customer, Alcart Enterprise offers to supply Softel Sdn Bhd a special customised electrical chips in bulk with the offer price of RM100,000. The costs associated with the offer are as follows:

RM

Direct material:

X 7000

Y 14,000

Direct labour 10,500

Supervision 3,500

Overhead 21,000

56,000

Additional information:

1. Softel Sdn Bhd provides 2% discount for a new customer and another 2% if the customer buys in bulk. Both of these discounts are treated as trade discount.

2. Direct material X is in stock and the above was the cost. However, direct material Y would have to be purchased at the cost shown above.

3. Direct labour cost of RM10,500 is related to the labours from another department that will be transferred to complete the offer. The another department will need to incur

RM12,250 to hire extra labour.

4. The overhead cost above consists of a quarter of fixed overhead cost and the remaining is the variable overhead cost. If the offer is accepted, the fixed overhead cost will increase to RM7,000.

5. Supervision will be carried out by existing staffs outside their normal duties. Therefore, the cost above is the overtime paid to them for the supervision.

6. Softel Sdn Bhd needs to use a special machine to complete the offer. The purchase price of the special machine is RM17,500. Besides that, the company needs to incur RM3,000 to deliver the customised electrical chips.

Required:

a. Calculate the additional revenue if Softel Sdn Bhd accept the offer from Alcart

Enterprise. (3 marks)

b. i. Compute the incremental profit or loss from the offer. (10 marks)

ii. Suggest to the management of Softel Sdn Bhd whether to accept or to reject the

offer from Alcat Enterprise (2 marks)

(Total: 15 marks)