SHIELDERS is a sole manufacturer of plastic shields to cater for local market. The following information...

 

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SHIELDERS is a sole manufacturer of plastic shields to cater for local market. The following information was obtained from the SHIELDERS: • The selling price per shield is RM60. • The variable manufacturing cost is RM20 per shield and the variable selling expense is RM4.00 per shield. • Total fixed manufacturing costs were RMI, 200,000 and total selling, marketing and administrative costs were RM400, 00. • SHIELDERS managed to sell 120,000 shiclds in the current year. • As part of its strategy to increase its sales during the pandemic season, SHIELDERS plans to decrease its selling price by 10% per shield next year. The decision to decrease its selling price was made to meet the decrease of its fixed cost (in total) by 20% the following year. Ignore income tax considerations. Required: Calculate the current year's breakeven in revenue (i.c. before the proposed increases next year) a. (4 marks) b. Compute the net profit for the current year (before the proposed increases next year. Show all workings. (4 marks) Compute the number of shields SHIELDERS needs to sell in the following year in order to achieve the same net profit as the current year (i.e. the net profit calculated in part (b) above), if the planned decrease in the selling price per unit and fixed cost in total is implemented. Assume that the variable cost per unit remains the same. Show all workings. c. (4 marks) d. SHIELDERS have a plan to migrate it production to another location. SHIELDERS will be able to reduce its variable manufacturing cost by 5% and fixed manufacturing cost by 10%. This will result in the company being able to reduce its selling price by 5%. Using break-even calculation, should SHIELDERS adopt this plan? Show all workings. (3 marks) e. Explain the benefit of a break-even analysis to SHIELDERS in its decision-making process. SHIELDERS is a sole manufacturer of plastic shields to cater for local market. The following information was obtained from the SHIELDERS: • The selling price per shield is RM60. • The variable manufacturing cost is RM20 per shield and the variable selling expense is RM4.00 per shield. • Total fixed manufacturing costs were RMI, 200,000 and total selling, marketing and administrative costs were RM400, 00. • SHIELDERS managed to sell 120,000 shiclds in the current year. • As part of its strategy to increase its sales during the pandemic season, SHIELDERS plans to decrease its selling price by 10% per shield next year. The decision to decrease its selling price was made to meet the decrease of its fixed cost (in total) by 20% the following year. Ignore income tax considerations. Required: Calculate the current year's breakeven in revenue (i.c. before the proposed increases next year) a. (4 marks) b. Compute the net profit for the current year (before the proposed increases next year. Show all workings. (4 marks) Compute the number of shields SHIELDERS needs to sell in the following year in order to achieve the same net profit as the current year (i.e. the net profit calculated in part (b) above), if the planned decrease in the selling price per unit and fixed cost in total is implemented. Assume that the variable cost per unit remains the same. Show all workings. c. (4 marks) d. SHIELDERS have a plan to migrate it production to another location. SHIELDERS will be able to reduce its variable manufacturing cost by 5% and fixed manufacturing cost by 10%. This will result in the company being able to reduce its selling price by 5%. Using break-even calculation, should SHIELDERS adopt this plan? Show all workings. (3 marks) e. Explain the benefit of a break-even analysis to SHIELDERS in its decision-making process.