Thursday 9 August 2018

Cost-Volume-Profit Analysis - Exercise

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A Malaysian novelist with a pen name Kepalakubuntu is producing series of novels namely Aku, Kau, Dia, Kita dan Mereka. Each of these novels have their own cost and Kepalakubuntu is now thinking and planning to sell these in the next 2 months. The costs are as below;

                                                       Aku           Kau            Dia            Kita           Mereka
Direct material - paper                       4                3                5                4                   6
Direct material - rock                         2                2                3                2                   4
Direct material - scissors                    5                -                 4                5                   3
Direct expenses                                 4                 5                3                3                   3


Each novels require 2 hours to produce with the total labour cost of RM4.50 per hour.

Currently, Kepalakubuntu had to pay for the rental of the factory for RM8,000 and will increase by 20% in three months time. He also had to bear the salary for his 3 lazy fulltime workers whose salaries are RM3,000, RM4,000 and RM3,500 respectively.

He planned to put the selling price of the novels as below;

Novels       Price                  Projected sales
Aku         RM40/unit             15,000 units
Kau         RM28/unit             10,000 units
Dia          RM35/unit             20,000 units
Kita         RM27/unit             12,000 units
Mereka    RM36/unit             23,000 units



Required;
  1. Calculate the BEP in units for each of the above novels.
  2. Calculate the BEP in RM for each of the above novels.
  3. If Kepalakubuntu wants to obtain additional profit of RM20,000, how many units he has to sell?
  4. An increase of 10% for the direct material - paper and labour rate may lead to an increase in the selling price of another 5% for each novels. In order to minimze such costing, Kepalakubuntu is also planning to sack one of his worker whose earning the highest salary. Still obtaining his targeted profit of RM20,000, what will be his new BEP units after all off the above were taken into accounts.


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