2) Sahmit this ve a which is sold through agents who recei Sdo Bhd makes only on

Question

2) Sahmit this ve a which is sold through agents who recei Sdo Bhd makes only one product information relates to the budgeted -of10% on selling pnce. The following oe and sales for the year ended 31 December 2018 by Aquaman Sdn Bbd RMSO Selling price par Direct Labour cost per unit Variable prodaction cost per unit RM20 RM12 RM4 | 10% of selling price RM 1,000,000 RM 650,000 RM 750,000 64,000 units Fixed Fixed selling overbead Fixed administration overbead Sales Required: Calculate the following: (a) Contribution per unit and contribution sales ratio e's ratio (b) The break-even point in units and value. c) Determine the target profit for the following alternative strategies: 4 marks) 4marks) (i) (ii) (ii) Reduce selling price by 1056. (3 marks) Spend RM250,000 on special advertising. 3 marks) Reduce selling price by 10% and spend RM2 50,000 on special advertising (3 marks) Reduce prime cost by RM5, reduce selling price by 10% and spend RM250,000 on special advertising (iv) (3 marks) (Total: 20 marks)

Explanation / Answer

Solution a:

Selling price per unit = RM 80

Variable cost per unit = RM 20 + RM 12 + RM 4 + 10% of RM 80 = RM44

Contribution per unit = RM 80 - RM 44 = RM 36

Contribution to sales = RM 36 / RM 80 = 45%

Solution b:

Total fixed cost = RM 1,000,000 + RM 650,000 + RM 750,000 = RM 2,400,000

Breakeven point in units = Fixed cost / contribution per unit = RM 2,400,000 / RM 36 = 66667 units

Breakeven point in value = Fixed cost / contribution margin ratio = RM2,400,000 / 45% = RM 5,333,333

Solution c:

Nos of sales units after strategy implementation is not provided in question therefore target profit cannot be calculated for each situation.

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