EZee Sdn Bhd sells EZ hand-mixer to selected retailers across the country. Each unit of the...

 

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EZee Sdn Bhd sells EZ hand-mixer to selected retailers across the country. Each unit of the hand-mixer is selling at a price of RM70 with RM40 in variable costs of goods sold. The company has fixed manufacturing costs of RM606,000 and fixed marketing costs of RM130,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%. REQUIRED: (a) How many hand-mixer must EZee sell in order to break even? (b) How many units must EZee sell in order to reach a target operating income of RM218,500? (c) How many units would EZee have to sell to earn the operating income in requirement (b) if: (1) the contribution margin per unit increases by 15%. (ii) the selling price is increased to RM72.00. (ii) the company outsources its production activity to an overseas company, which increases the variable costs per unit by RM8.00 and saves 50% of fixed manufacturing costs. (Consider each requirement independently. For each requirement above, explain how the change(s) affects the contribution margin per unit (CMU) and the required sales unit to achieve the target operating income.) EZee Sdn Bhd sells EZ hand-mixer to selected retailers across the country. Each unit of the hand-mixer is selling at a price of RM70 with RM40 in variable costs of goods sold. The company has fixed manufacturing costs of RM606,000 and fixed marketing costs of RM130,000. Sales commissions are paid to the wholesale sales reps at 10% of revenues. The company has an income tax rate of 20%. REQUIRED: (a) How many hand-mixer must EZee sell in order to break even? (b) How many units must EZee sell in order to reach a target operating income of RM218,500? (c) How many units would EZee have to sell to earn the operating income in requirement (b) if: (1) the contribution margin per unit increases by 15%. (ii) the selling price is increased to RM72.00. (ii) the company outsources its production activity to an overseas company, which increases the variable costs per unit by RM8.00 and saves 50% of fixed manufacturing costs. (Consider each requirement independently. For each requirement above, explain how the change(s) affects the contribution margin per unit (CMU) and the required sales unit to achieve the target operating income.)

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