(COST VOLUME PROFIT ANALYSIS)
The Costing Executive of Syarikat Laris Sdn Bhd produced the following information for the year ended 31 December 2012.
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Sales |
RM750,000 |
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Manufacturing Costs: |
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Variable manufacturing costs |
RM280,000 |
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Fixed manufacturing costs |
130,000 |
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Selling and Administrative Costs: |
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Variable selling and administrative costs |
RM120,000 |
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Fixed selling and administrative costs |
80,000 |
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The information above was based on sales of 100,000 units. Syarikat Laris Sdn Bhd has the capacity to produce 120,000 units during the year.
Required:
a) Determine the break even point in units.
b) The Sales Manager believes that the company can increase sales by 8,000 units if advertising expenditures were increased by RM22,000. By how much will income increase or decrease if this plan is implemented?
c) What is the maximum amount that the company should be willing to pay for advertising if sales increase by 8,000 units?
d) Why is the cost volume profit analysis a powerful tool for planning and decision making?