Question G1

Kinder Soaps Sdn. Bhd. is planning to launch its new soap, The Main Event, in Malaysia for 2022. Based on the current market condition, the factory plans to produce and sell 3,500 pieces. The new soap is sold for RM 15 each piece. The fixed costs consist of fixed production costs RM20,000 and fixed selling expenses RM 7,300. The variable costs per piece is RM 4.5. The relevant range is expected between 1,500 and 4,200 pieces.

Required: Mark is rewarded only when there is working for each of your answers.

(i) Calculate the break-even point in pieces and value. (3 marks)

2. Sketch a traditional break-even chart with all relevant labels. (3 marks)
3. Calculate the number of pieces of soaps if factory expects to make a profit

of RM14,700. (3 marks)

4. Calculate the margin of safety in units and value based on upper range. (3 marks)
5. If the factory produces existing 3,500 soaps, fixed production costs decreased

by RM3,000, variable costs (in total) is increased to RM 6, profit is expected to

be RM14,200, Calculate the new selling price per piece. (4 marks)

(Total: 16 marks)

Question G2

Soap Opera is the market leader in the soap manufacturing industry. The company plans to launch a new formula for its famous series bar soap, Dial Spring. After the announcement, the company has already received astonishing huge pre-orders from its existing consumers. The estimated sales for the year are 35,000 pieces.

Original proposal: The production of new soap will incur the following costs: Direct labor RM 5 per unit, Direct materials RM4 per unit, Variable overheads RM2 per unit, Fixed costs RM250,000. Current selling price is RM25 per piece.

Proposal 1: The production manager feels that if the production system is overhauled then total variable costs per unit could be reduced by RM2, however the overhaul would incur an additional fixed cost of RM50,000.

Proposal 2: The managing director wants to reduce the wastage by installing a new machine in the storage department. He calculates that both the unit costs of direct material and variable overheads could be reduced to RM3 and RM1.5 simultaneously. The new machine will most likely cost the company RM60,000.

Required:

Analyze the scenario above and advise the management the best course of action should be taken.

(Support your analysis with relevant calculation)

(Total: 16 marks)

Question E2

Clean-Soap (M) Sdn. Bhd. produces a special type of chicken sausage for its customers in Malaysia. The following information was provided by the company for the first two months of 2019:

Per unit:	RM
Selling price	40
Production costs:
Direct materials	10.00
Direct labour	6.00
Variable factory overheads	2.00
Fixed selling costs per month	60,000
Fixed production costs per month	54,000

Actual details for the months are as follows:

	January	February
Production in units	60,000	65,800
Sales in units	56,000	59,600

Additional information:

1. The opening inventory on 1 January 2019 was 10,500 units.
2. Variable selling expenses for both January and February are RM 448,000 and RM 476800 respectively.

Required:

Prepare an income statement for each of the two months ended 28 February 2019, using marginal costing method.