7/27/2019 UKMM1043 Basic Economic, Accounting and Management May 2012 Question

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  [Total: 40 marks]

 

Question 1

You are employed by Dynamics Sdn Bhd which manufactures microwave ovens for the consumermarket. The company has developed a new model of a microwave oven with the following budgeted

data.

ariable cost per unit !"

Direct materials #

Direct labour $

ariable overheads $

1%

The draft budget for the following year is as follows&

'roduction and sales %()((( units

*i+ed costs& !"

'roduction ,%()(((

-dministration ()(((

Selling and distribution 1(()(((

/ontribution #$()(((

ANSWER: 390,000 (NET PROFIT)

The Board of Directors has re0uested for improvements on the budgeted figures and the departmental

managers have come out with the following suggestions.

i2 The sales manager suggested to reduce selling price by 1(3. 4e e+pects sales 0uantity to

increase by an e+tra 5(3 unit. The purchasing manager has said that the materials

re0uirements will increase correspondingly and a materials price reduction of %.,63 could be

negotiated. 7ith this additional output) fi+ed production costs would increase by !"5()(((8

administration by !"6)(((8 and selling and distribution by !"1()(((. 9ther costs would

remain unchanged.

ANSWER: 402,000 (NET PROFIT)

ii2 The e+port manager has suggested that if the company increased overseas marketing by

!"16)((( then e+ports would increase from 16)((( units to 1:)((( units. 7ith this

suggestion) distribution costs would increase by !"1,)((( and all other costs would remainunchanged.

ANSWER: 39,000 (NET PROFIT)

iii2 The marketing manager has suggested that if an e+tra !"$()((( were spent on advertising)

then sales 0uantity would increase by ,63. The purchasing manager has indicated that in such

circumstances) materials cost would reduce by !"(.5( per unit. 7ith this suggestion) fi+ed

 production costs would increase by !",6)(((8 administration by !"$)(((8 and selling and

distribution costs by !":)(((. -ll other costs would remain unchanged.

ANSWER : !4",!00 (NET PROFIT)

iv2 The managing director believes the company should be aiming for a profit of !"$#%)(((. 4e

asks what the selling price would be per unit if marketing were increased by !"6()((() thisleading to an estimated increase in sales 0uantity of 5(3. 'roduction fi+ed costs would

7/27/2019 UKMM1043 Basic Economic, Accounting and Management May 2012 Question

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,

increase by !"%:)((() whilst material prices would decrease by %.,63 per unit. -ll other

costs would remain unchanged.

ANSWER: NET PROFIT (4#",000)

R$%&'r$:

a2 Taking each suggestion independently) compile a profit statement for option i2 to iii2) showing

clearly the net profit and contribution in each case) as well as its break;even point in units.

5( marks2

b2 *or suggestion iv2) calculate the selling price per unit as re0uested by the managing director.

1( marks2

<Total& $( marks=

<Total& 5( marks=