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Solve break even point and margin of safety

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Reference no: EM132550832

Noah Enterprise is studying the addition of a new product that would have an expected selling price of RM160 and expected variable product cost of RM100 per unit. Anticipated demand .is 8,000 units. A new salesperson must be hired because the company's current sales force is working at capacity.

Two compensation plans are under consideration:

Plan 1: An annual salary of RM32,000 plus 10% sales commission-based sales revenue.

Plan 2: An annual salary of RM140,000 and no sales commission

Required:

Question 1: Calculate the contribution margin and net profit of the two plans at 8,000 units.

Question 2: Solve break even point (unit and sales) and margin of safety (unit) of the two plants. Advice to the management which plan to be adopted.

Question 3: Suppose management plan to spend RM30,000 on advertising programme of the two plants, how many additional units must company sell to justify this additional expenditure?

Reference no: EM132550832

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