Reference no: EM132596537

Brunswick Son. Bhd. (Brunswick) has just started its business in the beginning of Year 2019. Brunswick manufactures and sells a single product, barrel. The income statement for Brunswick presented below shows the operating results for the fiscal year just ended 2019. Brunswick had sold 1,800 tonnes of barrels during that year. The manufacturing capacity of Brunswick's facilities is 3,000 tonnes of barrels.

Brunswick Sdn Bhd Income Statement for the year ended 2019

RM

Revenues            900,000

Variable costs:

Manufacturing       315.000

Non-manufacturing    180,000

                                495,000

Contribution margin      405,000

Fixed costs:

Manufacturing          90.000

Non-manufacturing     157.500

                          247.500

Profits                     157.500

In the recent management meeting, the sales manager is discussing with the team to introduce a few proposals on next year plan in order to maximize the profit earned by Brunswick. As the sales manager is unsure on the uses of cost-volume profit analysis in the short term decision making. you are appointed as the management accountant to closely assist him. There are two proposals being introduced in the recent management meeting as follows;

Proposal 1:

The sales volume is estimated to be 2,100 tons for next year, and the selling price and cost behaviour patterns to remain the same next year,

Proposal 2:

Assume Brunswick estimates the selling price per tonne will decline 10% next year, variable cost will increase by RM40 per tonne and total fixed costs will remain unchanged.

Required:

Question (a) Under proposal I, compute how much net income Brunswick expects to earn next year.

Question (b) Under Proposal 2, compute how many tonnes must be sold next year to earn a net income of RM157,500.