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Top Detergent (M) Sdn. Bhd. has produced the Original budget for its new product, Blooming Pleasure, to be launched in 2022. The customer that product targets is rich or affluent segment. Based on the current economic condition 2021 during MCO, the factory predicts that the demand for the new product will be 42,000 bottles which consume around 60% of production capacity. Under the budget, the selling price per bottle is RM35. The fixed costs consist of fixed production costs RM485,000 and fixed selling expenses RM160,000. The variable costs consist of direct materials RM3, direct labor RM10, and variable factory overheads RM4, and variable selling expenses RM3. The relevant range is expected between 29,500 and 76000 bottles.

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

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

(ii)Sketch a traditional break-even chart with all relevant labels. (3 marks)

(iii)Calculate the number of bottles if factory expects to make a profit

of RM135,000. (3 marks)

(iv)Calculate the profit or loss that could be expected if the factory operated at

60% of capacity. (3 marks)

(v)Calculate the break-even point in bottles if the total fixed costs increased by

20% and selling price increased by 15%. (3 marks)

(vi)If the factory operates at 85% of capacity, fixed production costs increased

by RM150,000, variable costs per bottle (in total) is reduced by 25%, profit

is expected to be RM180,000, Calculate the new selling price per piece. (3 marks)

(vii)The Marketing manager has made the following Second Budget:

If the quality of direct materials can be further improved, the production capacity in the Original budget will be increased by 30% and selling price is reduced by 22%. The increase in quality of direct materials will incur additional cost of RM2 per unit. (3 marks)

Examine your calculation in Originaland Second Budgetswith the current economic condition 2021 during MCO, advise the management which of the budget ought to be adopted (better).

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