Kein Company, a manufacturer of furniture which has been established for more than 3 years. As at December, 2018 the company has sold 2,500 units of furniture. The sales price of each furniture is RM150 per unit. The variable cost to produce one furniture is RM100 per unit. Fixed costs for the furniture production is RM50,000. Required: (a) Compute the variable cost ratio and contribution margin ratio. (Two decimal places). (b) Compute the breakeven unit and sales. (c) Calculate the number of furniture kein Company needs to sell in order to achieve a profit of RM200,000 per annum. (d) Using the contribution margin ratio computed in (a), compute additional profit that Kein Company would earn if sales were RM20,000 more than expected. (e) Based on unit sold of 2,500 compute the margin of safety in units and ringgit. (f) Calculate the degree of operating leverage. Now suppose that Kein Company revises the forecast to show a 20 percent increases in sales over the original forecast. What is the percentage change in operating income expected for the revised forecast? What is the total operating income expected by Kein Company after revising the sales forecast?

Kein Company, a manufacturer of furniture which has been established for more than 3 years. As at December, 2018 the company has sold 2,500 units of furniture. The sales price of each furniture is RM150 per unit. The variable cost to produce one furniture is RM100 per unit. Fixed costs for the furniture production is RM50,000. Required: (a) Compute the variable cost ratio and contribution margin ratio. (Two decimal places). (b) Compute the breakeven unit and sales. (c) Calculate the number of furniture kein Company needs to sell in order to achieve a profit of RM200,000 per annum. (d) Using the contribution margin ratio computed in (a), compute additional profit that Kein Company would earn if sales were RM20,000 more than expected. (e) Based on unit sold of 2,500 compute the margin of safety in units and ringgit. (f) Calculate the degree of operating leverage. Now suppose that Kein Company revises the forecast to show a 20 percent increases in sales over the original forecast. What is the percentage change in operating income expected for the revised forecast? What is the total operating income expected by Kein Company after revising the sales forecast?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...

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