The condensed income statement for Low & Lee partnership business for 2017 is as follows:

Low & Lee Partnership Income Statement For the Year Ended December 2017
	RM	RM
Sales (240,000 units)		1,200,000
Cost of goods sold		800,000
Gross profit		400,000
Operating expenses:
Selling	280,000
Administration	150,000	430,000
Profit / (Net Loss)		(30,000)

A cost behaviour analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.

(Other Instructions: Round up all calculations to 2 decimal place. Use the CVP income statement format for profit computations. Show all relevant calculations)

Requirement:

Compute the break-even point in total sales dollars and in units for 2017.

Low has proposed a plan to get the partnership out of the red and improve profitability. He feels that the quality of the product can be substantially improved by spending RM 0.25 more per unit on better raw materials. The selling price per unit could be increased to only RM 5,25 because of competitive pressures. Low estimates that sales volume will increase by 25%. What effect would Lows plans have on the profits and the break-even point in dollars of the partnership?

Miss Lee was a marketing major in University. She believes that sales volume can be increased only by intensive advertising and promotional campaigns. She therefore proposed the following plan as an alternative to Low:

Increase the variable selling expenses to RM 0.59 per unit.

Lower the selling price per unit by RM 0.25, and

Increase the fixed selling expenses by RM 40,000

Miss Lee refer to an old marketing research report that said that sales volume would increase by 60% if these changes were implemented. What effect would Miss Lees plan have on the profits and the break-even point in dollars of the partnership?

Which plan would you recommend to be implemented? Explain your answer.