Question
The following is the extract of the Income statement of a Rubber Glove company in Malaysia: STATEMENTS OF COMPREHENSIVE INCOME 2016 2017 2018 2019 2020
The following is the extract of the Income statement of a Rubber Glove company in Malaysia:
STATEMENTS OF COMPREHENSIVE INCOME
2016
2017
2018
2019
2020
Revenue
1,377,931,000
1,529,077,000
2,079,432,000
2,053,916,000
2,314,454,000
Cost of sales
-1,150,360,000
-1,155,975,000
-1,640,550,000
-1,818,767,000
-1,929,412,000
Gross profit
227,571,000
373,102,000
438,882,000
235,149,000
385,042,000
Other Income
8,973,000
6,979,000
10,372,000
26,689,000
15,634,000
Selling and distribution expenses
-46,520,000
-95,484,000
-66,008,000
-67,121,000
-71,401,000
Administration expenses
-46,155,000
-53,091,000
-80,987,000
-60,495,000
-101,062,000
Operating Profit
143,869,000
231,506,000
302,259,000
134,222,000
228,213,000
Interest income
0
0
4,288,000
10,573,000
12,340,000
Finance cost
-10,151,000
-8,530,000
-639,000
-242,000
-113,000
Share of loss/profit
909,000
-984,000
-947,000
917,000
262,000
Profit before tax
134,627,000
221,992,000
304,961,000
145,470,000
240,702,000
Taxation
-26,524,000
-53,922,000
-54,550,000
-30,338,000
-33,417,000
Profit / (Loss) after tax
108,103,000
168,070,000
250,411,000
115,132,000
207,285,000
You are required:
1.Separate the fixed and variable costs of the company
2.Determine the projected Fixed overheads / Operating expenses of the company for 2023
3.Determine the projected Profit margin of the company's manufacturing operation
4.Determine the Breakeven point of the company's manufacturing now? What is the current level of Safety margin of the company?
5.Determine the Degree of Operating Leverage (DOL) of the company?
6.Determine the degree of Financial Leverage (DOL) of the company?
7.If the company have been selling its rubber glove at an average price of RM 0.40 per pair, what could be the lowest price that company could accept for a special order of say 500,000,000 gloves if the company could create the capacity conveniently without increasing its operating costs?
8.Based on the average variable costs of manufacturing per pair, could the company consider taking over a manufacturing space / capacity that could produce at RM 0.15 per pair.?
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Financial and Managerial Accounting the basis for business decisions
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
18th edition
125969240X, 978-1259692406
