Selasih Company manufactures aluminium containers for restaurants. The owner of Selasih, Puan Atiqah, believes that an aggressive campaign is needed next year due to the Malaysian local market's uncertain conditions. Presented below isthe data for the current year 2021, for use in next year's cam paign. COST SCHEDULE Variable Costs per Box Fixed Costs per Month (RM) 25,000 (RM) Manufacturing: Direct materials Manufacturing overhead Selling and Administrative Total 4 110,000 Direct labour per unit Manufacturing overhead Total 8 135.000 15 Puan Atiqah has set the sales target for the year 2022 at a level of RM550,000 (22,000 units of containers), or ten percent more than the sales in the year 2021. The selling price of the container is RM25 each, for both years. Required: a) Prepare a contribution margin income statement for the year 2021. b) Calculate Selasih's break-even point in units and ringgit for the year 2021 c) PuanAtiqah believes that to attain the sales in 2022; the company must incur an additional selling expense of RM10,000 for advertising in 2022, with all other costs rem aining constant. What will be the break-even point in RM salesfor 2022 if the company spends the additional RM10,000? d) "Break-even analysis is of limited use to management because a company cannot survive by just breaking even." Do you agree with the statement? Explain.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
icon
Concept explainers
Question

Question 2

Please assist on sub-part c, d in details.

Question
Selasih Com pany manufactures aluminium containers for restaurants. The owner of Selasih, Puan Atiqah,
believes that an aggressive cam paign is needed next year due to the Malaysian local market's uncertain
conditions. Presented below isthe data for the current year 2021, for use in next year's cam paign.
COST SCHEDULE
Variable Costs per Box
Fixed Costs per Month
(RM)
(RM)
Manufacturing:
Manufacturing overhead
Selling and Administrative
25,000
Direct materials
110,000
Direct labour per unit
Total
135,000
Manufacturing overhead
3
Total
15
Puan Atiqah has set the sales target for the year 2022 at a level of RM550,000 (22,000 units of containers),
or ten percent more than the sales in the year 2021. The selling price of the container is RM25 each, for both
years.
Required:
a) Prepare a contribution margin income statem ent for the year 2021.
b) Calculate Selasih's break-even point in units and ringgit for the year 2021
c) PuanAtiqah believes that to attain the sales in 2022; the company must incur an additional selling
expense of RM10,000 for advertising in 2022, with all other costs remaining constant. What will be
the break-even point in RM sales for 2022 if the company spends the additional RM10,000?
d) "Break-even analysis is of limited use to managem ent because a company cannot survive by just
breaking even." Do you agree with the statement? Explain.
Transcribed Image Text:Question Selasih Com pany manufactures aluminium containers for restaurants. The owner of Selasih, Puan Atiqah, believes that an aggressive cam paign is needed next year due to the Malaysian local market's uncertain conditions. Presented below isthe data for the current year 2021, for use in next year's cam paign. COST SCHEDULE Variable Costs per Box Fixed Costs per Month (RM) (RM) Manufacturing: Manufacturing overhead Selling and Administrative 25,000 Direct materials 110,000 Direct labour per unit Total 135,000 Manufacturing overhead 3 Total 15 Puan Atiqah has set the sales target for the year 2022 at a level of RM550,000 (22,000 units of containers), or ten percent more than the sales in the year 2021. The selling price of the container is RM25 each, for both years. Required: a) Prepare a contribution margin income statem ent for the year 2021. b) Calculate Selasih's break-even point in units and ringgit for the year 2021 c) PuanAtiqah believes that to attain the sales in 2022; the company must incur an additional selling expense of RM10,000 for advertising in 2022, with all other costs remaining constant. What will be the break-even point in RM sales for 2022 if the company spends the additional RM10,000? d) "Break-even analysis is of limited use to managem ent because a company cannot survive by just breaking even." Do you agree with the statement? Explain.
Expert Solution
steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Receivables Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education