Am Berhad is a company producing tables. After discussing with the marketing manager, theproduction manager planning to focus on producing a product named AFI. The marketingmanager is observing on two states, Selangor and Pahang, the sales at both states isexpected to be RM500,000 an RM810,000 respectively. Information related to the cost perunit of the production for both states are as follows:SELANGOR (RM)PAHANG (RM)Selling priceDirect material1001354045Direct labour1015Overhead203050% of the overhead in SELANGOR and PAHANG are fixed.2.Calculate the followings and show all your workings.i.The break-even point (in unit and sales value) for both states.i.The margin of safety (in unit) for both states.ii.Advice to the management in which state should the company sell AFI.

i) Break even point in unit = Fixed cost / contribution per unit Break even point in sale value =…

Answered: Am Berhad is a company producing…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Am Berhad is a company producing tables. After discussing with the marketing manager, the
production manager planning to focus on producing a product named AFI. The marketing
manager is observing on two states, Selangor and Pahang, the sales at both states is
expected to be RM500,000 an RM810,000 respectively. Information related to the cost per
unit of the production for both states are as follows:
SELANGOR (RM)
PAHANG (RM)
Selling price
Direct material
100
135
40
45
Direct labour
10
15
Overhead
20
30
50% of the overhead in SELANGOR and PAHANG are fixed.
2.Calculate the followings and show all your workings.
i.
The break-even point (in unit and sales value) for both states.
i.
The margin of safety (in unit) for both states.
ii.
Advice to the management in which state should the company sell AFI.

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Marketing manager suggests the company should sell CHANTEQ in both states as he is confident the market would be good. However, the direct material cost will increase by 10%.

Advise the management on how many units to be sold for both states to maintain its annual profit.

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