The company manufacture office chairs for the local market. For 2021, sales are estimated at 17,000 units.

The following information was obtained from the 2021 budget file:

Sales RM170,000

Cost Fixed (RM) Changed (RM)

Raw material 51,000

Direct labor 34,000

Production overhead 17,000 25,500

Sales and administration 18,700 8,500

Total cost 35,700 119,000 RM154,700

Estimated operating income RM 15,300

REQUIRED:

(a) Calculate the break -even point in units and in value (RM).

(b) If the company sets a profit target of RM10,200, how many units of office chairs should be sold?

(c) If the fixed cost increases by RM5,355, calculate the new break -even point in units.

(d) If a company spends RM2,550 on newspaper advertising, sales are estimated to increase to 20,400 units. Do you agree with the companys proposal? Prove it by calculation.

(e) Calculate and interpret the safety margin results in units and percentages.

(f) How can the break-even point method help entrepreneurs in a Covid-19 pandemic situation?

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