Renungan Company produces a single product. The projected income statement for the coming year, based on sales of 100,000 units, is as follows:
Sales RM2,000,000
Less: Variable costs 1,100,000
Contribution margin RM 900,000
Less: Fixed costs 765,000
Operating income RM 135,000
Required:
a) Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. Determine the profit without having to prepare an income statement.
b) Compute the contribution margin ratio and the break-even point in ringgit. Suppose that revenues are RM200,000 greater than expected. Determine the profit without having to prepare an income statement.
c) Compute the margin of safety in ringgit?
d) Compute the operating leverage. Without having to prepare an income statement, compute the new profit level if sales are 20% higher than expected.
e) How many units must be sold to earn a profit equal to 10% of sales?
f) Assume the income tax rate is 40%. How many units must be sold to earn an after-tax profit of RM180,000?