Matahari Landscape Sdn. Bhd. produces small plant stands which sells for RM25 each. The company's annual...

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Matahari Landscape Sdn. Bhd. produces small plant stands which sells for RM25 each. The company's annual level of production and sales is 120,000 units. In addition to RM430,500 of fixed manufacturing overhead and RM159,050 of fixed administrative expenses, the following per unit costs have been determined for each unit: Direct material Direct labour Variable manufacturing overhead Variable selling expense RM6.00 RM3.00 RM0.80 RM2.20 Required: (a) Prepare variable costing income statement at the current level of production and sales. (4 marks) (b) Determine the break-even point in units and in Ringgit Malaysia (RM). (2 marks) (c) Compute the margin of safety ratio and explain the significance of the ratio to the company. (3 marks) (d) Calculate the company's degree of operating leverage. Assuming if the sales increase by 25%, determine the effect (in percentage change) on the company's net income. (3 marks) (e) The company is considering the option to increase its fixed manufacturing overhead by RM7,865 as part of their expansion strategy. How many plant stands units must be sold if the company has a desired net income earning of RM657,800 and is subjected to a 20% tax rate? (4 marks) (f) The company received an offer from a Singaporean company to buy 4,000 plant stands at RM20 per unit. The variable selling expense per unit of the additional units will be M2.80 (rather than RM2.20) and RM18,000 additional fixed administrative expense will be incurred. This sale will not affect the current domestic sales or their cost. Should the company accept the offer? Matahari Landscape Sdn. Bhd. produces small plant stands which sells for RM25 each. The company's annual level of production and sales is 120,000 units. In addition to RM430,500 of fixed manufacturing overhead and RM159,050 of fixed administrative expenses, the following per unit costs have been determined for each unit: Direct material Direct labour Variable manufacturing overhead Variable selling expense RM6.00 RM3.00 RM0.80 RM2.20 Required: (a) Prepare variable costing income statement at the current level of production and sales. (4 marks) (b) Determine the break-even point in units and in Ringgit Malaysia (RM). (2 marks) (c) Compute the margin of safety ratio and explain the significance of the ratio to the company. (3 marks) (d) Calculate the company's degree of operating leverage. Assuming if the sales increase by 25%, determine the effect (in percentage change) on the company's net income. (3 marks) (e) The company is considering the option to increase its fixed manufacturing overhead by RM7,865 as part of their expansion strategy. How many plant stands units must be sold if the company has a desired net income earning of RM657,800 and is subjected to a 20% tax rate? (4 marks) (f) The company received an offer from a Singaporean company to buy 4,000 plant stands at RM20 per unit. The variable selling expense per unit of the additional units will be M2.80 (rather than RM2.20) and RM18,000 additional fixed administrative expense will be incurred. This sale will not affect the current domestic sales or their cost. Should the company accept the offer?

Answer rating: 100% (QA)

a VARIABLE COSTING INCOME STATEMENT Sales revenue 3000000 Lessvariable costs Variable manufacturing ... View the full answer