FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The...
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FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The normal annual production and sales for the toys are 2,800 units, although the company has the capacity to produce up to 3,000 units. The following data consist of costs incurred during the year ended 2019: Material (100% variable) Labour (70% variable) Selling expenses (40% variable) Fixed administrative expenses The management accountant of the company is proposing the following alternatives to increase sales for the year 2020 and to reduce the idle capacity: 1. Reducing the selling price to RM110 per unit which would lead to an estimated increase in the sales volume by 30%. 2. An increase in sales would result in an increase of variable labour cost per unit by 15%. Required: a) Determine the following costs in year 2019: i. Total variable costs per unit. 3. Fixed selling expenses is also expected to increase to RM32,500 due to an aggressive advertising and marketing campaign planned to boost sales. marks) ii. Total fixed costs. b) Calculate the following in year 2019: ii. RM 70,000 80,000+ i. Break-even points in units and in value. iii. 58,000 50,000 marks) Margin of safety in units and in value. marks) The expected sales value if the company targets for a profit of RM100,000. FunKids Sdn Bhd produces a type of toy which is sold for RM120 per unit. The normal annual production and sales for the toys are 2,800 units, although the company has the capacity to produce up to 3,000 units. The following data consist of costs incurred during the year ended 2019: Material (100% variable) Labour (70% variable) Selling expenses (40% variable) Fixed administrative expenses The management accountant of the company is proposing the following alternatives to increase sales for the year 2020 and to reduce the idle capacity: 1. Reducing the selling price to RM110 per unit which would lead to an estimated increase in the sales volume by 30%. 2. An increase in sales would result in an increase of variable labour cost per unit by 15%. Required: a) Determine the following costs in year 2019: i. Total variable costs per unit. 3. Fixed selling expenses is also expected to increase to RM32,500 due to an aggressive advertising and marketing campaign planned to boost sales. marks) ii. Total fixed costs. b) Calculate the following in year 2019: ii. RM 70,000 80,000+ i. Break-even points in units and in value. iii. 58,000 50,000 marks) Margin of safety in units and in value. marks) The expected sales value if the company targets for a profit of RM100,000.
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