talented painters. Last year, they started painting postcards which they gave to their friends as a gift. After that, they began selling those postcards at a craft fair and sold them for fun. At the last fair, a buyer who really liked the postcards and offered them the contract to paint 500 postcards of a specific design for a price of RM2,000. With the inerease in demand, Adam and Akmal decided to open a business and named it as 4A Craft. Each postcard priced at RM4.00. Variable operating costs amounted to RM1.50 per postcard. To produce the posteards for the contract, they have to buy a specilic machine for cutting the postcard, which cost the amount of RM700. (i) If Adam decides to renegotiate the contract at the price of RM5.00 per postcard, solve for the new value of EBit (ii) If the buyer refuses to pay more than RM4.00 per postcard, but willing to negotiate on the quantity, identify the quantity of postcards through proper calculation that will result in the EBIT value of RM1, 200
talented painters. Last year, they started painting postcards which they gave to their friends as a gift. After that, they began selling those postcards at a craft fair and sold them for fun. At the last fair, a buyer who really liked the postcards and offered them the contract to paint 500 postcards of a specific design for a price of RM2,000. With the inerease in demand, Adam and Akmal decided to open a business and named it as 4A Craft. Each postcard priced at RM4.00. Variable operating costs amounted to RM1.50 per postcard. To produce the posteards for the contract, they have to buy a specilic machine for cutting the postcard, which cost the amount of RM700. (i) If Adam decides to renegotiate the contract at the price of RM5.00 per postcard, solve for the new value of EBit (ii) If the buyer refuses to pay more than RM4.00 per postcard, but willing to negotiate on the quantity, identify the quantity of postcards through proper calculation that will result in the EBIT value of RM1, 200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Adam and his friend, Akmal, are both talented painters. Last year, they started painting postcards which they gave to their friends as a gift. After that, they began selling those postcards at a craft fair and sold them for fun. At the last fair, a buyer who really liked the postcards and offered them the contract to paint 500 postcards of a specific design for a price of RM2,000. With the inerease in demand, Adam and Akmal decided to open a business and named it as 4A Craft. Each postcard priced at RM4.00. Variable operating costs amounted to RM1.50 per postcard. To produce the posteards for the contract, they have to buy a specilic machine for cutting the postcard, which cost the amount of RM700.
(i) If Adam decides to renegotiate the contract at the price of RM5.00 per postcard, solve for the new value of EBit
(ii) If the buyer refuses to pay more than RM4.00 per postcard, but willing to negotiate on the quantity, identify the quantity of postcards through proper calculation that will result in the EBIT value of RM1, 200.
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