Mika Sdn Bhd manufacture vase branded as Flora for local market. The following is the information on production cost and other expenses related to July 2021.

Details of cost elements	2000 Units of Vases (RM)
Fixed Administration expenses	4,500
Indirect labour	9,500
Power	1,000
Fixed Rental	1,400
Selling and Distribution	6,500
Direct labour	25,000
Factory supplies	2,500
Direct materials	50,000
Total cost	64,200

 

The averages selling price of the vase is RM50.20 per unit. The maximum capacity of the production is 10,000 vase per month.

Required:

(a).       Calculate the break even point (in unit and RM) for Mika Sdn Bhd.

 

(b).       What should be the new selling price for the company to break even if it can only sell 1,500 vases per month?

 

(c).       Based on (a) above, calculate the expected net profit at a sales level of 3,000 vases when an additional commission of RM1 per vase is incurred after the break-even point as computed in (a) above.   

(d)        identify the margin of safety (in unit and percentage) (I any).

 

(e).       The company is planning to introduce a new vase, Celica of which the selling price and variable cost of RM85.00 and RM45.00 respectively. The proposed production of Celica is 3,000 vases monthly and the sales mix of the Flora and Celica is planned at 60% (Floral) and 40% (Celica). The introduction of Celica in the market resulted the fixed cost increased by RM15,000.

Required:

            (i).        Construct a table showing cumulative profit for Flora and Celica.  

 

(ii)        Draw a multi-product profit volume chart (CVP chart) for these two vases.

               

(ii)           Indicate the BEP (In units) on the chart drawn.

               

(iii)          Advise Mika the options available in setting up the selling price of these two vases.

Answer rating: 100% (QA)

Break even point It is the point at which company entity earn no profit and no loss from the activit... View the full answer