Aequilibrium Inc manufactures high quality bag with their local brand in Indonesia called Topaz. The brand claimed that many women can use the bags in many occasions and for young professional women. Their main materials are batik cloth and wood. They must buy those materials from their suppliers and group them as Raw Material account.

They set the selling price is $250 for Topaz with the direct labor cost per unit is 10% of the selling price. They have $10 for Utilities Expenditure per one unit they produce in Factory and $24,000 they must pay for each month for Utilities Expenditure in factory. For their office, they pay $15 per unit they sold for Utilities Expenditure.

They use lubricating oil for their machines and always do that in the morning and night so they the machine can operate well, they said, it will be a disaster if they don’t give oil to the machine. They also must wash the batik cloth before they make the bag. The total amount for those supporting materials’ expense is $20 per unit.

They of course have building for their operation and they record their depreciation $24,000 for factory and $4,000 for Office building each month. The machine depreciation’s calculation $36,000 each month and Vehicle depreciation for all management are $2,000 each month.

They give sales commission for their sales persons $5 per unit they sell and they also give salary to the all employees, for office area $10,000 and $7,200 for all supervisors and managers in factory area. For January 2021 , they had no raw material inventory left from December 2020, so they purchased 5,000 packages their raw material and it costed them $50 for each unit. For the ending January 2021, they still had $10,000 on hand. They didn’t have beginning raw material inventory but they had $10,000 for their Work in Process per 1st January 2021 and $20,000 per 31st January 2021. They also had 20,000 as their beginning finished goods inventory in January 2021 and $4,000 on hand on 31st January 2021. They had additional information related to their production:

1. There is no additional number of package for the process, they only process based on the number of direct material they use.
2. The number of produced products are 4,800 units and they sold 4,600 units to their customer in January.

Required:

1. Calculate their net operating Income under variable costing and absorption costing and give your explanation for the result!
2. Calculate their break event points in units and in dollars, also if they want to get $1,000,000 profit, how many units they must sell and how much total sales they must get? Please interpret the result!
3. What will the company do to face the new normal - Pandemic Covid era? What is your prediction about that and give the reasons and issues related to the new normal era relate to the challenges and solutions that they can do with evidences (can be from news or videos)!

Answer rating: 100% (QA)

Selling price per unit 250 4600 x 250 1150000 Direct Labor per unit 10 of 250 25 4800 x 25 120000 Utilities expenditure factory per unit 10 4800 x 10 48000 Utilities expenditure factory per month 2400... View the full answer