Question

Question (October 2015)

ABC Company developed the following information for its products:

	RM/unit
Salse price	60
Variable cost:
Direct material cost	12
Direct labor cost	8
Variable factory overhead	10
Variable selling expenses	5
Total fixed factory overhead	RM150,000
Total fixed selling and admin expenses	RM80,000
Units sold	12,000 units

Required:

(a) Calculate variable cost per unit and total fixed expenses.

(b) Calculate the operating profit for ABC Company using contribution margin income statement.

(c) Calculate the break-even quantity.

(d) If the company plans improve its marketing strategy by paying a marketing agency a fixed amount of RM10,000 a year, how many additional units must be sold to earn the same operating income it is now making? Check your answer by preparing a contribution margin income statement based on the new quantity.

Answer 1