ACC3324 Mid-Term Test S2/17

Answer both questions.

Question 1

Wee Jie Ltd manufactures and sells a variety of products. The company’s contribution
margin format income statement for the recent year is given below:

Total (RM)
Sales (25, 000 units) 2, 125, 000
Less: Variable expenses (875, 000)
Contribution margin 1, 250, 000
Less: Fixed expenses (120, 000)
Net profit 1, 130, 000

You are required to:

(a) Compute the company’s breakeven point in both units and RM.
(b) Assume the sales revenue will increase by RM2, 450, 125 and variable expenses by
RM133, 875 next year. If the fixed expenses remain unchanged, by how much will
the company’s net profit increase?
(c) From the original data, compute the company’s margin of safety in both RM and %.
(d) Assume that in the next two years’ time, management wants the company to earn a
minimum profit of RM3, 000, 000 and the fixed cost will be increased by RM180,
000. How many units should be sold to meet this target profit?
(5 Marks)

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ACC3324 Mid-Term Test S2/17

Question 2

The estimates for the next four month period for LJL Limited are as follows:

March April May June

Sales (units) 80 84 96 94
Production (units) 70 75 90 90
Purchases of raw materials (units) 80 80 85 85
Wages and variable overheads RM4, 550 RM4, 870 RM5, 850 RM5, 850
Fixed overheads RM1, 200 RM1, 200 RM1, 200 RM1, 200

The company intends to sell each unit for RM219 and has estimated that it will have to
pay RM45 per unit for raw materials. One unit of raw material is need for each unit of
finished product.
All sales and purchases of raw materials are on credit. Debtors are allowed two months’
credit with the balance of debtors being RM7, 680 and RM10, 400 in January and
February respectively. Suppliers of raw materials are paid after one month’s credit and
the creditors’ balance in February is RM3, 900. The wages, variable overhead and fixed
overheads are paid in the month in which they are incurred.

Cash from a loan of RM120, 000 at an interest rate of 7.5% is due to be received on 1
May. Machinery costing RM112, 000 will be received in May and paid for in June.

The loan interest is payable half-yearly from September onwards. An interim dividend to
31 March of RM12, 500 will be paid in June.

The opening cash balance at 1 March is RM6, 790.

REQUIRED

Prepare a cash budget for LJL Limited from March to June.

(5 Marks)

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