GSM5301 Accounting for Decision-Making

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GSM5301 Accounting for Decision Making
Baiki Kasut Sdn Bhd

Baiki Kasut Sdn Bhd, an established shoe repair shop, provides service to repair shoes for residents in Cheras. Due to the high quality of services provided by Baiki Kasut and the economic crisis, the number of shoes sent for repair has been increasing.

The monthly number of shoes and costs are given below:

|Month |Pair of Shoes |Total Costs | |March |1,200 |RM7,900 | |April |1,650 |RM10,150 | |May |1, 800 |RM10,900 | |June |2,000 |RM11,900 |

Currently, Baiki Kasut is charging RM10 fee for repairing a pair of shoes. Jihan, the owner is interested to identify the number of shoes that will give no profit to the company. He further asks, “In April, how far is Baiki Kasut from the point of not making any profit? What is the implication of this distance?

If Baiki Kasut seeks to earn profit equivalent to 15% on sales in June, how many shoes have to be repaired? Some customers have requested for a discount of 10% because they have been loyal to Baiki Kasut. Baiki Kasut’s nearby competitor is also slashing their prices to attract more customers. If Baiki Kasut does not cut its price, some of its loyal customers may prefer the competitor. But, can Baiki Kasut afford to lower its fee if it seeks to sustain its targeted profit of 20% on June sales?

Two days ago, Jihan met the owner of the shop lot to discuss renewing the annual rental contract. Jihan was given two options: a fixed monthly rental of RM800 as it is, or a fixed monthly rental of RM400 plus RM0.15 per pair of shoes. Which renewal option should Jihan choose? Will there be an indifferent point between these options?

Due to the increasing demand from customers, Baiki...
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