Professional Documents
Culture Documents
Topic 1: Cost-Volume-Profit (CVP) Analysis Exercise 1: BKAM3023 Management Accounting II
Topic 1: Cost-Volume-Profit (CVP) Analysis Exercise 1: BKAM3023 Management Accounting II
Exercise 1
New Fashion Sdn Bhd operates a chain of shirt stores around Kedah. The stores
carry many styles of shirts that are sold at the same price. To encourage sales
personnel to be aggressive in their sales efforts, the company pays a substantial
sales commission on each shirt sold. Sales personnel also receive a small basic
salary. The following information contains cost and revenue data for Store C:
New Fashion Sdn Bhd is a fairly new organization. The company has asked you,
as a member of its planning group, to assist in some basic analysis of its stores
and company policies.
REQUIRED:
(a) Calculate the annual break-even point in RM sales and in unit sales for
Store C.
(b) Prepare a CVP graph showing cost and revenue data for Store C from
zero level of activity up to 30,000 shirts sold each year. Clearly indicate
the break-even point on the graph.
(c) If 19,000 shirts are sold in a year, what would be Store C’s net operating
income or loss?
(d) The company is considering paying the store manager of Store C an
incentive commission of RM3 per shirt (in addition to the salespersons’
commissions). If this change is made, what will be the new break-even
point in RM sales and in unit sales?
(e) Refer to original data. As an alternative to (d) above, the company is
considering paying the store manager a RM3 commission on each shirt
sold in excess of the break-even point. If this change is made, what will be
the store’s net operating income or loss if 23,500 shirts are sold in a year?
(f) Refer to the original data. The company is considering eliminating sales
commissions entirely in its stores and increasing fixed salaries by
RM107,000 annually.
(i) If this change is made, what will be the new break-even point in RM
sales and in unit sales in Store C.
(ii) Would you recommend that the change be made? Explain.
1
BKAM3023 Management Accounting II
Exercise 2
Good Furniture Sdn Bhd distributes a lightweight chair that sells for RM15 per
unit. Variable costs are RM6 per unit, and fixed costs total RM180,000 annually.
REQUIRED:
Answer the following independent questions:
Exercise 3
2
BKAM3023 Management Accounting II
Maju Sdn Bhd has been operating for only a few months. The company sells
three types of tables, plastic, wooden and steel. Budgeted sales by product and
in total for the coming month are shown below:
REQUIRED:
3
BKAM3023 Management Accounting II
In 2019 the Dharma Homeless (DH) had sold 950 lunch coupons at RM65 each
to raise fund for its association. The following report was prepared for the lunch
event in 2019:
Dharma Homeless
Fund Raising Income Statement for 2019
RM
Lunch coupons sales 61,750
Less: cost of foods and drinks for the lunch 37,100
Gross margin 24,650
Less: other cost related to lunch coupons 28,550
Loss (3,900)
The cost of the foods and drinks can be broken down into RM12,400 fixed costs
and the remaining were variable costs. Other cost related to lunch coupons
amounted to RM28,550 of which RM14,300 were fixed and RM14,250 were
variable.
REQUIRED:
(a) Prepare income statement for the year 2019 using the contribution margin
format.
(b) Determine the number of lunch coupons should have been sold in order to
breakeven in 2019.
(c) Calculate the profit for 2020 if DH is to double the sales of lunch coupons
assuming fixed costs will be the same as last year.
(d) Suggest any TWO (2) alternatives that can reduce the cost of organizing
lunch fund raising program.