White Pink Sdn Bhd makes only one product which is sold through agents who receive a commission of 5% on selling price. The following information relates to the budgeted cost and sales for the year ended 31 December 2021 by White Pink Sdn Bhd: Selling price per unit RM20 Direct material cost per unit RM5 Direct Labour cost per unit RM3 Variable selling overhead (sales commission) 5 % of selling price Fixed selling overhead RM 26,000 Fixed administration overhead RM 10,000 Production Overhead RM108,000 Sales 16,000 units

Additional information The production overhead in the table above includes both variable and fixed element and are absorbed on a cost per unit basis. A production overhead cost amounting to RM108,000 is at a capacity level of 16,000 units. While a production overhead cost amounting to RM120,000 is at a maximum capacity level of 20,000 units.

Required: a. Contribution per unit and contribution sales ratio c/s ratio. (2 marks) b. The break-even point in units and value. (2marks) c. Determine the target profit at a sales units of 16,000 for each of the following alternative strategies separately:

(i) Reduce selling price by 10% (4 marks)

(ii) Spend RM1,000 on special advertising (4 marks)

(iii) Reduce selling price by 10% and spend RM1,000 on special advertising (4 marks)

(iv) Reduce direct material cost by RM1, reduce selling price by 10% and spend RM1,000 on special advertising (4 marks) d. Critically evaluate the importance of cost-volume profit analysis in managerial decision making. (20 marks) (Total: 40 marks) QUESTION 2

You have been engaged with PQR Ltd, a manufacturing company to provide advice on the most profitable production plan for the company.

The company makes three products Alpha, Beta and Gamma and the appropriate data are as follows for the year 2021:

Cost per unit and selling price

Alpha Beta Gamma RM RM RM Direct Material Cost 70 120 75 Direct Labour Cost Operation 1 (RM3 per direct labour hour) 18 24 30 Operation 2 (RM4 per direct labour hour) 20 16 12 Variable Overhead Cost Operation 1 (RM1.50 per direct labour hour) 9 12 15 Operation 2 (RM2 per direct labour hour) 10 8 6 Fixed Overhead 33 36 39 Selling Price 197.00 275.00 228.00

Alpha Beta Gamma Budgeted volume per annum 600 400 800

There is a constraint on the direct labour hours for Operation 1 which is limited to 12,000 direct labour hours.

The sales director has already accepted an order for 100 ALPHA, 200 BETA and 400 GAMMA which must be supplied. These quantities are included in the market demand estimates above.

a. Identify any shortfall for the year 2021 based on the above information. (2 marks)

b. Determine the production units of each product in order to maximise profit. (15 marks) c. Calculate the maximum profit based on your answer obtained in (b) above. (3 marks) d. Critically evaluate whether limiting factor and throughput accounting are the same thing. (20 marks)

(Total : 40 marks)