MA 2 : COST VOLUME PROFIT ANALYSIS

GNX Sdn. Bhd. is a manufacturing company producing meal replacement healthy drinks called Lean Protein. Its products are currently sold in Malaysia, Sirgapore and Thailand. The following data relates to the current years operation of the company. Annual sales volume 50.000 units RI! 100 Variable production cost per unit 40 Variable selling expenses per unit 10 Fixed -r'oduction overhead 900.000 500.000 Fixed marketin- and sellin- a lo -nses. 450,000 The management is planning to increase the sales of Lean Protein as well as the company's current profit. The team has suggested the followirg proposals: Proposal 1: To spend an additional RM50.GDD of advertisement cost which will subsequently cause the sales units and variable selling expenses to increase by 10% respectively. Other cost data will remain the same. Proposal 2: To purchase a new machine at a cost of RMSD.DDIII and the machine will have an estimated useful life of 5 years with no book value. Selling price per unit is forecasted to increase by RM20. Other cost data will remain tl'e same. Required: (a) Determine the break-even point in units and value for the current year. (5 marks) (b) Calculate the company's margin of safety in units and value for its current year's opemtion. (3 marks) (c) If the management has set a minimum annual profit of RM1.IJG0.0DO, calculate the new sellirg price that the company should charge for the current year. Other data will remain the same. (6 marks) (d) Analyse the two proposals above and identify the best recommendation. Showr all relevant calculations and justify your clubs