Question

project management and finance subject

a) Determine if each of the following would be considered a fixed cost or a variable cost. Explain your answer. i) The property taxes for the year are 5% of the value of the building. (2 marks) ii) The direct materials used for packaging finished goods cost is RM2 per finished good. (2 marks) iii) Sketch a graph to show cost versus volume which represents the type of costs in Question 4 a) i) and ii) above. (3 marks) 1 Add file b) Printrite is a specialised manufacturer in the assembly of print modules. The projected after tax net income for the current year is RM1,200,000 based on a sales volume of 400,000 print modules. Printrite has been selling the print modules at RM32 each. The variable costs consist of the RM18 per unit purchase price charged by the vendor for the printer head and a handling cost of RM4 per unit. Printrite's annual fixed costs are RM2,000,000. Printrite's income tax rate is 40%. Required: i) Find Printrite's BEP for the current year in unit of sales? And in sales revenue? (4 marks) ii) Find the after tax income for the current year if a sales strategy has been planned to boost an increase of 10% in

Answer 1

al The property Any i Property tax is Fixed cost . Fixed cost are the Cost which do not Vary with change in Volume. Even the Production is zero Company has to pay property tax Property tax remains the same and only change if the Value of Building change Am ii Packaging Cost associated with a Product would be a Variable cost. Since the packaging Costs would increase sales increased Packaging cost Variable Costa as is

Ars in YA Variable cost Amount Fixed cost Sales Cunits

Am b] 40000 Point Modules Particulars Amount Perunit Sales 12800,000 32.0(4000W X 32 ) - Variable cast Purchase price 7,200,000 7:200000 18.0(400oco 18) Handling (ost 1600000 4.0 (40000 x4) Contribution Margin 4,000,000 10.0 Les Fixed cost 2,000,000 5.0 2000000 5.0 profit Les Income tax 800000 2:0 (2000000 X404) profit Affor tax 1200ood 3.0l J BEP (units) = Fixed Cost Contributi an PU 2000,000 - 200000 Units

sig] BEP (Sales) amount = 200000 X 32 units ocupa 6400000 (hovom x 10' Any ii Increase of 100% in Salis Volume Sales volume = 40oooo+ 10% = 4.40000 Controbution Morgin will remain Saka same as no change in selling Prike or Variable cost Contributich 4,400000 () Fixed cost 2.000 pou Profit 2,400poo t) Income tax 960000 profit affirfax T440,000 :. Affer tax Income - 14 40000

Required Sales Fixed cost t Required profit Plv Rectio Plv Ratio Contribution xio Sales Contribution = 32-(18+18%20%) - 4 32- 2116-4 64 plv Ratio = 6.4 x 10 32 20 s. 2,000,000 + 1200000 201 sales [ 16,000 000 Camount) Sales (in unit) = 500000 units (16000000 / 32