Answer Happy

The directors of Red Pink Sdn Bhd, a business which makes only
one product,
have been reviewing the following summarized profit and loss
account for the
quarter just ended.
Sales (60,000 units) RM4,800,000
Direct material cost RM1,680,000
Direct Labour cost RM 960,000
Production Overhead RM1,040,000
Administration overhead RM 720,000
Selling Overhead RM 480,000 (RM4,880,000)
Loss (RM 80,000)
Additional information
(1) The production overhead includes variable production overhead
at
RM4.00 per unit. Administration overhead and selling overhead are
fully
fixed.
Required:
a. Contribution per unit and contribution sales ratio c/s ratio. (2
marks)
b. The break-even point in units and value. (2marks)
c. The following alternative proposals have been put forward to
improve profits in
the current quarter. Determine the target profit expected and
break-even point
(to the nearest unit of product) for each of the following
alternative proposals
separately:
(i) Reduce selling price by 10% , expecting sales volume to
increase by 40%
(4 marks)
(ii) Reduce fixed cost by 5% (4 marks)
(iii) Increase wage rate by 25%, expecting production and sales
volume to increase
by 20%
(4 marks)
(iv) Introduce cost reduction programme to reduce prime cost by RM4
per unit.
Spend RM400,000 on advertising and expect sales volume to increase
by 10%.
(4 marks)