Homework answers / question archive / Question 1 (25 marks) Peter Parker is carrying the business of selling fountain pen

Question 1 (25 marks) Peter Parker is carrying the business of selling fountain pen

Management

Share With

Question 1 (25 marks) Peter Parker is carrying the business of selling fountain pen. The selling price of its pen is RM30/unit, whereas the variable cost is RM12/ unit. The fixed expense is estimated to be RM216,000 per month. He expects to sell 15,000 pens per month. Peter Parker hears about the importance of break-even analysis, but he is not certain about its usefulness. Therefore, he engaged you to advise him on the following matters: Required: (a) What is the monthly break-even point in unit sales and in RM sales? Explain to Peter Parker the meaning of break-even point with your calculation. [5 marks ] (b) If he wants to attain a target profit of RM90,000 per month, how many units of pen he has to sell? [2 marks] (c) Prepare a contribution format monthly income statement at the target sales level for attaining target profit of RM90,000 [ 5 marks ] (d) By using the original sales of 15,000 units, compute Peter Parker's margin of safety in units and percentage. Then advise Peter on your findings. [5 marks ] (e) If variable cost increases to RM15/unit due to higher labour cost and fixed cost increases to RM250,000, what is the new break-even point? [2 marks] 0 Considering the situation (e) above where all the costs have increased, but Peter Parker's sales remain unchanged at the level of 15,000 units @ RM30/unit, what can you conclude? [2 marks] ...5/ (9) List the assumptions underlying the cost-volume-profit analysis. [4 marks ]