QUESTION 3 (20 Marks) A. For two years, Minah has been the manager of the production department of a company manufacturing toys made of plastic-coated cardboard. One of the toys is a paper doll, whose "clothes" are made of acetate, and stay on the doll with static electricity. The company's sales were mainly to large educational institutions until last year, when the dolls were sold for the first time to a large discount retailer. The dolls were sold out immediately, and enough orders were received to keep the department at full capacity for the immediate future. 3/5 ACC5100 CONFIDENTIA L The fixed costs for the department are RM50,000, with RM1 per unit variable costs. A paper doll and one set of clothes sell for RM3. The maximum volume is 80,000 units. With the increased volume, Ms. Larson is considering two options to improve profitability. One would reduce variable costs to RM0.75, and the other would reduce fixed costs to RM35,000. Required: Given the fact that sales are increasing, make a recommendation to Minah about which option she should choose. Support your recommendation with a calculation showing her how profitability will change with each option. (12 marks)