Requirement: Cost-volume-profit analysis Company Z has two products (Z1 and Z2) with the… 1 answer below »

Requirement: Cost-volume-profit analysis

Company Z has two products (Z1 and Z2) with the following unit costs for a period: –

                                                         Z1                         Z2  

                                                         (RM/unit)    (RM/unit)

Direct materials                                  1.20              2.30

Direct labour                                       1.40             1.50

Variable production overheads        0.70             0.80

Fixed production overheads             1.10             1.10

Variable selling overheads                 0.15            0.20

Fixed selling overheads                      0.50            0.50

Selling price                                          5.70            6.90

Production and sales of the two products for the period were: –

                                                               Z1               Z2

                                                     (`000 units) (`000 units)

Production                                        250               100

Sales                                                  225               110

Required:

a.) Explain whether, and why, absorption or marginal costing would show a higher company profit for the period, and calculate the difference in company profit depending upon which method is used. (7 marks)

b.) Calculate the: (8 marks)

      i.) breakeven sales units; and

     ii.) breakeven sales revenue (based on average selling price) for the period (to the nearestRM`000) with regards to the above sales mix.

(Total: 15)