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Cost separation assignment

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The following is the extract of the Income statement of a Rubber Glove company in Malaysia :

STATEMENTS OF COMPREHENSIVE INCOME

2016

2017

2018

2019

2020

Revenue

1,377,931,000

1,529,077,000

2,079,432,000

2,053,916,000

2,314,454,000

Cost of sales

-1,150,360,000

-1,155,975,000

-1,640,550,000

-1,818,767,000

-1,851,563,200

Gross profit

227,571,000

373,102,000

438,882,000

235,149,000

462,890,800

Other Income

8,973,000

6,979,000

10,372,000

26,689,000

15,634,000

Selling and distribution expenses

-46,520,000

-95,484,000

-66,008,000

-67,121,000

-71,401,000

-46,155,000

-53,091,000

-80,987,000

60,495,000

-178,910,800

Operating Profit

143,869,000

231,506,000

302,259,000

134,222,000

228,213,000

Interest income

0

0

4,288,000

10,573,000

12,340,000

Finance cost

-10,151,000

-8,530,000

-639,000

-242,000

-113,000

Share of loss/profit

909,000

-984,000

-947,000

917,000

262,000

Profit before tax

134,627,000

221,992,000

304,961,000

145,470,000

240,702,000

Taxation

-26,524,000

-53,922,000

-54,550,000

-30,338,000

-33,417,000

Profit / (Loss) after tax

108,103,000

168,070,000

250,411,000

115,132,000

207,285,000

You are required :

1.     Separate the fixed and variable costs of the company

2.     Determine the projected Fixed overheads / Operating expenses of the company for 2023

3.     Determine the projected Profit margin of the company’s manufacturing operation

4.     Determine the Breakeven point of the company’s manufacturing now ? What is the current level of Safety margin of the company ?

5.     Determine the Degree of Operating Leverage  (DOL) of the company ?

6.     Determine the degree of Financial Leverage (DOL) of the company ?

7.     If the company have been selling its rubber glove at an avverage price of RM 0.40 per pair, what could be the lowest price that company could accept for a special order of say 500,000,000 gloves if the company could create the cpacity conveniently without increasing its operating costs ?

8.     Based on the average variable costs of manufacturing per pair, could the company consider taking over a manufacturing space / capacity that could produce at RM 0.15 per pair. ?

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[Solved] Cost separation assignment

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• Submitted On 02 Nov, 2021 05:03:50
QUESTION 1 FIXED AND VARIABLE COST YEAR 2016 (RM) 2017 (RM) 2018 (RM) 2019 (RM) 2020 (RM) FIXED COST Administration Expenses 46,155,000 53,091,000 80,987,000 60,495,000 178,910,800 Finance cost 10,151,000 8,530,000 639,000 242,000 123,000 Taxation 26,524,000 53,922,000 54,550,000 30,338,000 33,417,000 TOTAL FIXED COST 82,830,000 115,543,000 136,176,000 91,075,000 212,450,800 increase of expenses = total fixed cost (2017) - Total Cost (2016) VARIABLE COST % increase = Selling & distribution Expenses 46,520,000 95,484,000 66,008,000 67,121,000 71,401,000 QUESTION 2 PROJECTED FIXED EXPENSES/ OPERATING EXPENSES FOR 2023 Projected Fixed Expenses: 2016 (RM) 2017 (RM) 2018 (RM) 2019 (RM) 2020 (RM) 2023 (RM) Increase of Fixed Expenses 0 32,713,000 20,633,000 -45,101,000 121,375,800 % of increase 70% 22% -68% 181% Average increase per year 51.25% In 2023 increase over 2020 i.e for 3 years 3*51.25= 153.75% Projected Fixed Expenses in 2023 307,991,093 Projected Operating Expenses Sales Revenue 1,377,931,000 1,529,077,000 2,079,432,000 2,053,916,0...
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Cost separation assignment

QUESTION 1 FIXED AND VARIABLE COST YEAR 2016 (RM) 2017 (RM) 2018 (RM) 2019 (RM) 2020 (RM) FIXED COST Administration Expenses 46,155,000 53,091,000 80,987,0...

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