SUGGESTED SOLUTION

TEST 2 MAF201
SEMESTER SEPT 2019 – JAN 2020

SOLUTION 1

a. Variable cost per unit:

RM
Direct Material 30.00 √
RM270,000/9,000
Direct Labour 15.00 √
RM135,000/9,000
Direct Expenses 5.00 √
RM45,000/9,000
Total 50.00 √

Total fixed cost per month:

RM
Production OH 120,050 √
Administration 80,030 √
Selling & Distribution 50,000 √
Total 250,080 √
(8√ x ½ mark = 4 marks)

b. i) BEP (units): BEP (RM)

= TFC
CM/unit

= RM250,080 √ = 1,563 units (OF) √ x RM210 √

RM210 √ - RM50 √

= 1,563 units. = RM328,230

ii) MOS = Sales units - BEP units

MOS = 9,000 √ – 1,563 (OF) √

MOS = 7,437 units

iii) Net profit = (RM210√ x 9,000) - (RM50 x 9,000 √) – RM250,080 √

= RM1,189,920

(10√ x ½ mark = 5 marks)

1
 c. New TFC = (RM250,080 + RM49,920 √)
= RM300,000

New BEP (units)

= TFC
CM/unit

= RM300,000 √
RM210 – RM50√

= 1,875√

New MOS (units) = Sales units - BEP units MOS (RM) = 13,125√ OF x RM210√
= 15,000 √ – 1,875 = RM2,756,250
= 13,125

New Net Profit = Px – bx - a

= (RM210 x 15,000 √) – (RM50 x 15,000√) – RM300,000√
= RM2,100,000
(10√ x ½ mark = 5 marks)

d. Net profit for multi-product.

Contribution Margin CM x Sales units

Product (CM) Sales units (RM)
Premium 70% x RM250
Phalaenopsis =RM175.00 √ 80% x 15,000 = 12,000 √ 2,100,000√
Latex 60% x RM220
Phalaenopsis =RM132.00 √ 15% x 15,000 = 2,250 √ 297,000√
55% x RM150
Mini Phalaenopsis =RM82.50 √ 5% x 15,000 = 750 √ 61,875√

2,458,875
Less:
Total fixed cost 350,000√

Net Profit 2,108,875

(10√ x ½ mark = 5 marks)

2
Alternative answer:

Contribution
Product Margin Sales Mix WACM
Premium
Phalaenopsis RM175.00 √ 80% √ RM140.00
Latex
Phalaenopsis RM132.00 √ 15% √ RM19.80
Mini
Phalaenopsis RM82.50 √ 5% √ RM4.13
RM163.93

New Net Profit = (WACM x sales units) – TFC

= (RM163.93√ x 15,000 √) – RM350,000 √
= RM2,458,875 – RM350,000
= RM2,108,875 √

The company should proceed with the plan to stop producing Satin Phalaenopsis
arrangements and replace it with three (3) new types of arrangements√ because the Net
Profit is higher √ by RM918,955 [RM2,108,875 – RM RM1,189,920]

(2√ x 1 mark = 2 marks)

e. Four (4) assumptions of CVP Analysis

i. All other variables remain constant.
ii. Single product or constant sales mix.
iii. Total costs and total revenues are linear functions of output.
iv. Profits are calculated on a variable costing basis.
v. Analysis applies to relevant range only.
vi. Costs can be accurately divided into their fixed and variable elements.
vii. The analysis applies only to a short-term time horizon.
(or any acceptable answers)
(4√ x 1 mark = 4 marks)
(Total: 25 marks)

3
SOLUTION 2

a)

iii) Sales budget (in units and value)

Quarter 1 Quarter 2
Sales units 1,254 √√ 1,200 √√
x) Selling price per unit 620 650
Sales revenue 777,480√ 780,000√

(6√ x ½ = 3 marks)
ii) Production budget (in units)

Quarter 1 Quarter 2
Sales units 1,254 1,200
+) Closing stock 9,600 √√ 10,080 √√
-) Opening stock (8,000) √ (9,600) √
Production units 2,854 1,680

(6√ x ½ = 3 marks)
iii) Direct material usage and purchase budget (in units and value)

Quarter 1 Quarter 2
RESAK MERBAU RESAK MERBAU
Production units 2,854 1,680
X Material usage per unit 2√ 4√ 2 4
Total material usage 5,708 11,416 3,360 6,720
+) Closing stock 2,940√√ 1,210√√ 4,000√ 1,210√
- ) Opening stock (3,000) √ (1,100) √ (2,940) (1,210)
Total material to be purchased 5,648 11,526 4,420 6,720
x) Purchase price per unit 25√ 12√ 28√√ 14√√
Purchase cost 141,200 138,312 123,760 94,080

(16√ x ½ = 8 marks)

iv) Direct labour cost budget

Quarter 1 Quarter 2
Skilled Semi-skilled Skilled Semi-skilled
Production units 2,854 1,680
x) Hours required per unit 3√ 5 3 5√
Total hours required 8,562 14,270 5,040 8,400
x) Rate per hour 10√ 8 10 8√
Total labour cost 85,620 114,160 50,400 67,200

(4√ x ½ = 2 marks)
v) Production cost budget (for the first quarter only)

4
 RM
Direct materials:
RESAK 5,708 units xRM25 142,700√√
MERBAU 11,416 units x RM12 136,992√√

Direct Labour:
Skilled 8,562 hours x RM10 85,620√√
Semi - skilled 14,270 hours x RM8 114,160√√

Production Overheads:
Variable RM3 x (8,562 hours + 14,270 hours) 68,496√√√
Fixed 5,000√
PRODUCTION COST 552,968

(12√ X ½ = 6 marks)
(22 marks)

b) THREE (3) advantages of budgeting:

i) Budget act as a tool to communicate management objective and plans throughout
the organization.
ii) Budget assist manager in coordinating employees activities in line with
organization goals.
iii) Budget helps manager to allocate organization resources more efficiently.
iv) Budget provides benchmark to the management to evaluate the current operation
and performance of employees.
v) Budget assists management in planning and controlling expenditures and activities
taken to achieve organization objectives.
vi) Budget enables management to predict operating result and financial condition in
future period.
(Any 3 points x 1 = 3 marks)
(Total: 25 marks)

END OF SUGGESTED SOLUTION