Rose Trading had RM210,000 of net profit in year 2021 when the selling price per unit was RM150, the variable costs per unit were RM90, and the fixed costs were RM570,000. Management expects per unit data and total fixed costs to remain the same in year 2022. The manager of Rose Trading is under pressure from investors to increase net profit by RM52,000 in year 2022. Required: (iii) Assume that Rose Trading sells the same number of units in year 2022 as it did in year 2021. What would the selling price have to be to reach the shareholders’ desired profit level? (iv) Assuming actual sales in year 2022 are 16,000 units with the new selling price as computed in (c), compute the margin of safety in (i) units and (ii) as a ratio. Briefly explain your findings. (Tips: Interpret about margin of safety)
Rose Trading had RM210,000 of net profit in year 2021 when the selling price per unit was
RM150, the variable costs per unit were RM90, and the fixed costs were RM570,000.
Management expects per unit data and total fixed costs to remain the same in year 2022. The
manager of Rose Trading is under pressure from investors to increase net profit by RM52,000 in
year 2022.
Required:
(iii) Assume that Rose Trading sells the same number of units in year 2022 as it did in year
2021. What would the selling price have to be to reach the shareholders’ desired profit
level?
(iv) Assuming actual sales in year 2022 are 16,000 units with the new selling price as computed
in (c), compute the margin of safety in (i) units and (ii) as a ratio. Briefly explain your
findings. (Tips: Interpret about margin of safety)
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