RantauBags Company plans to sell 10,000 handbags at RM400 each in the coming year. Data on cost per handbag are as follows: Direct materials RM80 Direct labour RM125 Variable overhead RM15 Variable selling expense is a commission of 5 percent of the sales price. Total fixed factory overhead amounts to RM800,000. Fixed selling and administrative expense totals RM400,000. a. Prepare a contribution margin income statement for RantauBags for the coming year. b. What is the effect on RantauBags operating income if 13,000 units are manufactured and sold next year? Show computation. c. Calculate the number of units RantauBags must sell in order to breakeven. d. Calculate the number of units RantauBags must sell to achieve a target operating income of RM240,000. e. Calculate the margin of safety in sales (RM) for the coming year. f. Discuss TWO benefits of manager’s possessing the knowledge/understanding on cost-volume-profit analysis.
RantauBags Company plans to sell 10,000 handbags at RM400 each in the coming year. Data on cost per handbag are as follows:
|
Direct materials |
RM80 |
|
Direct labour |
RM125 |
|
Variable overhead |
RM15 |
Variable selling expense is a commission of 5 percent of the sales price. Total fixed factory overhead amounts to RM800,000. Fixed selling and administrative expense totals RM400,000.
a. Prepare a contribution margin income statement for RantauBags for the coming year.
b. What is the effect on RantauBags operating income if 13,000 units are manufactured and sold next year? Show computation.
c. Calculate the number of units RantauBags must sell in order to breakeven.
d. Calculate the number of units RantauBags must sell to achieve a target operating income of RM240,000.
e. Calculate the margin of safety in sales (RM) for the coming year.
f. Discuss TWO benefits of manager’s possessing the knowledge/understanding on cost-volume-profit analysis.
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