Question 4 (a) Matrix Games manufactures computer games. Last year Matrix sold 25000 games at RM 50 each. Total cost amounted to RM 1,050,000 of which RM 300,000 was considered fixed. In an attempt to improve its product, the company is considering to replace a component part that has a cost of RM5 with a new and improved part costing RM 9 per unit in the coming year. A new machine would also be needed to increase plant capacity. The machine would cost RM 36,000; have a useful life of 6 years with no salvage value. It is estimated that all other variable costs will be at the same cost per unit in the coming year. The only increase in fixed cost, over the preceding year, would be caused by the installation of a new machine to increase plant capacity. The company uses straight line depreciation on all plant assets. Required: (i) (ii) (iii) What was Matrix's break- even point in number of units last year? (3 marks) How many units of product would the company have had to sell last year to earn RM 280,000 profit? (3 marks) If Matrix holds the sales price constant and makes the suggested changes, how many units of product must be sold in the coming year to break even? (4 marks) If Matrix holds the sales price constant and makes the suggested changes, how many units of product will the company have to sell in the coming year, to make the same net profit as (iv) last year? (v) (5 marks) If Matrix wishes to maintain last year's contribution margin ratio in the coming year, what selling price per unit of product must it change to cover the increased direct material cost? (5 marks) (b) Discuss how cost-volume-profit analysis can assist management in making decision. (5 marks) (Total: 25 marks)