1. TeakTock Sdn Bhd is a producer of teak wood dining tables. It has been experiencing a steady growth over the last 2 years. However, the increased competition has led Mr. Andy, the Managing Director, to believe that an aggressive campaign is needed next year to maintain the companys present growth. The companys accountant has presented Mr. Andy, with the following data for the current year, 2020, for use in preparing next years advertising campaign.

Variable cost for 1 dining table	RM1,000
Total fixed selling and administration costs	RM13,500,000
Selling price per table	RM2,500
Sales in 2020 (150,000 tables)	RM375,000,000

1. Compute the followings for 2020:

1. What is the operating profit?
2. What is the contribution margin per unit?
3. What is the break-even point in units?

(6 marks)

2. Mr. Andy believes that to attain the sales target in the year 2021, the company must incur an additional selling expense of RM6,000,000 for advertising in 2021, with all other costs and selling price remaining constant.

Compute the following for 2021:

1. What will be the break-even point in units if the company spends the additional RM6,000,000?
2. If the company spends the additional RM6,000,000 for advertising in 2021, what is the sales level in units to generate the same level of operating profit as in 2020? (4 marks)
3. Based on your answers in (i) and (ii), clearly explain the impact of the increase in advertising expense on the companys ability to achieve the same operating profit as in 2020.
4. As a manager for TeakTock Sdn Bhd, present 2 recommendations to lessen the impact of the increase in the advertising cost? Explain your recommendations clearly. (6 marks) (Total = 26 marks)