Cost-Volume Profit Analysis - Hijab Empire

Break-even Point

Exercise 1

Sahera Manufacturing produces a satin hijab by the name of Hijaberz. Below are the information regarding the production of the above product.

Selling Price          RM80

Variable cost

Satin cloth(m)        2 metres@RM14/metre

Label (pc)              2 pcs@RM1.50/pc

Direct labour          1.25 hours@RM12/hr

Rental of shop       RM20,000 per year

Other fixed cost     RM15,000 per year

Production units    2000 pcs.

Required;

    1. Break-even point (units) and RM. 
2. New BEP in the Sahera wants to put additional profit of RM25,000.
3. If Sahera engage Mira Faezah as her hijab model, she needs to pay additional RM8,000. What will be her new BEP without the additional profit plan.

Exercise 2

A newcomer in hijab industry, Nadia, came out with a new design of hijab with a new tagline ‘Hijab for all’. Currently she produces 3000 pcs limited edition hijab this year with the following cost.

                 

Selling price          RM100

Variable cost

Secret cloth           1.5 metres@RM20/metre

Label (pc)              1 pc@RM2.20

Direct labour          1.75 hours@RM14/hr

Rental of studio    RM15,000 per year

Model contract      RM10,000 per model (standard)

During the year, she engaged 1 female and 1 male models to promote the hijab plus the advertisement cost of RM10,000. The male model received 40% lesser than the standard contract.

Required;

You have been asked to calculate the BEP (units) and RM for the said hijab.

   

    Since there are two big competitors in the hijab industries, Nadia has approached Sahera to join forces and create a new business entity called ‘The Hijab Awakens”. The rental cost of both business can be combined and reduced by RM5,000 while Mira Faezah, the existing model asking for an increase to her contract by 20%. It has been agreed that a new label be introduced at RM2 per piece for every hijab produced. The production units remain.

• Calculate new combined BEP(units) and RM
• Comment on the merger of the two businesses