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Gina runs a restaurant, Kedai Makan Ginger in Pekan Gemas. The rental cost of the restaurant is RM7,500. Additional information is given below:
Sales RM96,000
Direct material RM 21,500
Direct labour RM 27,100
Variable overhead RM 13,500
Gina plans to expand its business by renting a new restaurant in Pekan Nenas. With that plan, the cost of direct labour will increase by 30% and there will be an increase in its variable overhead by RM2,500.
Problem a) Should this new plan be accepted? Justify your answer by showing the relevant calculations.
Problem b) Explain the relevant qualitative factors that need to be considered when making decision on whether to accept or reject the special order for Kedai Makan Ginger.
Calculate the cost per unit under (1) Plan A and (2) Plan B. Explain why the cost per unit is different for each of the two plans. (Round to two decimals.)
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