Ramli Burgers Bhd sold 20,000 units of its only product and incurred a RM50,000 loss (ignoring taxes) for the current year as shown in contribution margin income statement below. During the budget setting meeting for next year’s 2016 activities, the production manager notes that variable costs can be reduced by 50% by installing a machine that automates several operations. To obtain these savings the company must increase its annual fixed cost by RM150,000. The maximum output capacity of the company is 40,000 units per year. Ramli Burgers Contribution margin income statement for the year ended 31 December 2015 RM Sales 750,000 Variable costs 600,000 Contribution margin 150,000 Fixed costs 200,000 Net loss (50,000) Required a) Compute the break-even point in ringgit sales for 2015. b) Compute the predicted break-even point in ringgit sales for the year 2016 assuming the machine is installed and there is no change in unit sales price. c) Prepare a forecasted contribution margin income statement for 2016 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold will not change and no income tax will be due. d) Explain marginal costing and how it is applied in planning and decision making.
Ramli Burgers Bhd sold 20,000 units of its only product and incurred a RM50,000 loss (ignoring taxes) for the current year as shown in contribution margin income statement below. During the budget setting meeting for next year’s 2016 activities, the production manager notes that variable costs can be reduced by 50% by installing a machine that automates several operations. To obtain these savings the company must increase its annual fixed cost by RM150,000. The maximum output capacity of the company is 40,000 units per year. Ramli Burgers Contribution margin income statement for the year ended 31 December 2015 RM Sales 750,000 Variable costs 600,000 Contribution margin 150,000 Fixed costs 200,000 Net loss (50,000) Required
a) Compute the break-even point in ringgit sales for 2015.
b) Compute the predicted break-even point in ringgit sales for the year 2016 assuming the machine is installed and there is no change in unit sales price.
c) Prepare a
d) Explain marginal costing and how it is applied in planning and decision making.
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