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Serai Textile makes table cloth under the brand name Silka. Its selling price is RM90 per metre and the variable cost for each metre is RM30. The fixed costs incurred for the month of July 2020 are as follows:
Rental of sewing machine RM 51,800
Promotion & advertising RM 60,400
Problem a) Explain what contribution margin is and determine the contribution margin per metre for Silka.
Problem b) Calculate the break even point for Silka in metre and RM.
Problem c) The marketing manager has estimated a decrease of 20% of its promotion & advertising cost. The price of Silka will also be reduced to RM70 per metre. Calculate the new break even point for Silka in metre and RM.
Problem d) Discuss how cost-volume-profit analysis could assist the management of Serai Textile in its daily operation.
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