Yaya Laboratory supplied hospitals with a comprehensive swab test kit for Covid-19 screening namely C-Swab at a price of RM50 per unit. The following data relate to the manufacturing and sales of the C-swab for the current year: Annual sales Direct material Direct labour Total production overhead Total administration overhead Total royalty RM 1,500,000 600,000 150,000 180,000 70,000 180,000 Additional information: 1. Direct material cost and direct labour cost change in direct proportion with the production units. 2. Total production overhead is a semi variable cost. The laboratory absorbs the variable production overhead based on 40% of direct labour cost. 3. Total administration overheads include distribution expenses which are charged at RM1 for every unit sold. 4. Royalty cost is referred to the patent trademark which is paid for every unit produced and sold. Required: (Each question is to be treated independently) Identify the following: a. i. ii. Contribution margin per unit for the current year. The break-even point in volume and value for the current year. The profit that will be earned at the current level of sales. Assuming the volume and other costs are unchanged, what should the selling price be for the next year if Yaya Laboratory is to earn a targeted profit of RM450,000? iv. b. Due to the increase in demand the company plans to increase the sales to 75,000 units for the following year. To achieve the sales target, the company is expected to increase materials cost per unit by 20%, and additional lab testing cost of RM1.00 per unit. In addition, the company will also need to install a new lab software and has to pay a long term license at a cost of RM25,000. Required: Predict the new profit for the company. (3 marks) c. Reliable and efficient testing to screen for the disease has become increasingly important. Accordingly, the management of the laboratory plans to introduce two (2) new line of swab test kit in addition to the current swab test kit namely Adv-Swab and Kid-Swab. The variable cost per unit for this new test kit is expected to be RM32 and RM22 respectively and the selling price per unit is RM60 and RM40 respectively. Yaya Laboratory plans to sell the test kits at the following sales mix: Products Units to be sold C-Swab 18,000 Adv-Swab 20,000 Kid-Swab 12,000 To cater for the increased in production, the laboratory has to increase its total fixed production overhead by RM10,240. Required: Advise the management of the laboratory whether they should proceed with the plan with reference to the break-even point
