Reference no: EM132789858

Question - Benson Berhad manufactures and sells a single product. The following budged information has been prepared for the next period:

Selling Price per unit RM440

Per unit variable cost:

Direct material RM140

Direct labor RM120

Manufacturing overhead RM 50

Sales and administration expense RM 20

Sales and production 8,000 units

Fixed overheads RM234,300

The company is concerned about the quality and demand for its products. They are considering installing a new machine which would reduce the direct labor cost by one-third but increase total fixed overheads by 50%. All other costs per unit and the selling price would remain unchanged.

Required -

(i) Calculate the break-even points in units and sales values using the existing production units and if the new machine is introduced.

(ii) Calculate the margin of safety as a % of the budgeted sales for both the existing production and if the new machine is introduced.

(iii) Calculate the number of units need to be sold to achieve the profit objective of RM60,000 if the new machine is introduced.