QUESTION 4 Green Grocer Ltd is a manufacturing entity in the city of Clutchmore. The company...

QUESTION 4

Green Grocer Ltd is a manufacturing entity in the city of Clutchmore. The company manufactures and sells a single product by the name of Product P.

In the financial year ended 30 June 2020, 200,000 units of Product P were sold for $10 each. The cost of sales was $6 per unit, and the total amount was considered as variable cost.

In addition, other expenses incurred by the company were as follows:

	Variable Cost component	Fixed Cost component
Marketing expenses	$0.80 per unit	$164,000
Administration expenses	$1.20 per unit	$176,000

Required:

A. Green Grocer Ltd wants to double the amount of profit made in the next financial year (i.e. year ending 30 June 2021). In order to achieve this:

- The company will increase the selling price of Product P by $0.50 per unit.
- The production processes will be changed. This will cause an increase in cost of sales of $1.30 per unit. Combined marketing and administration expenses, however, will decrease by $0.40 per unit for the variable cost component, and the fixed cost component will decrease by $60,000.

Based on the proposed pricing and cost structure, calculate the number of units of Product P needed to achieve the targeted profit in the next financial year.

(B) If Green Grocer Ltd abandons the proposed plan to change the pricing and cost structure of Product P as outlined in part (d), and the company still wants to double its profit in the next financial year (i.e. year ending 30 June 2021), then a second product by the name of Product Q may be introduced.

Product Q will sell for $12 per unit and has a variable cost of $8.50 per unit. In addition, total fixed cost will increase by $100,000 due to the company having to purchase additional equipment to manufacture Product Q.

The expected sales is 150,000 units of Product P and 100,000 units of Product Q.

Calculate:

1. the weighted average contribution margin (WACM), and
1. the number of units of Product P and Product Q required to earn the desired profit in the next financial year.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Green Grocer Ltd is a manufacturing entity in the city of Clutchmore. The company manufactures and...

Green Grocer Ltd is a manufacturing entity in the city of Clutchmore. The company manufactures and sells a single product by the name of Product P. In the financial year ended 30 June 2020, 200,000 units of Product P were sold for $10 each. The cost of sales was $6 per unit, and the total amount was considered as variable cost. In addition, other expenses incurred by the company were as follows: Variable Cost component Fixed Cost component Marketing expenses...

QUESTION TWO Golf Ltd. is a manufacturing entity located in Hobart. The company has three main...

QUESTION TWO Golf Ltd. is a manufacturing entity located in Hobart. The company has three main divisions: The Golf Club Division, the Golf Balls division, and the Clothing and Shoes division. The Golf Club division’ profit has been increasing over the past 10 years. The division has recently implemented several advanced manufacturing techniques. Robotic technology plus scanners test for defects, and the engineering and design team use computers to draft and test new products. The following managers work in the...

Assignment #2 Question #4 National Distributors Ltd is a manufacturing company whose annual financial performance is...

Assignment #2 Question #4 National Distributors Ltd is a manufacturing company whose annual financial performance is determined by preparing its final accounts at the end of the financial period which ends on October 31st each. The following Trial Balance was extracted from the company’s books on October 31, 2016: Trial Balance Details/Accounts Dr $ Cr $ Cash at bank 20,000,000 Furniture and office equipment 4,000,000 Provision for depreciation furniture and fittings 800,000 Administrative salaries 12,000,000 Discounts 400,000 320,000 Production supervisors...

Question 4: Suppose you work for a company interested in an investment in green technology. It...

Question 4: Suppose you work for a company interested in an investment in green technology. It would change your production practice but also make it more environmentally friendly. You estimate the costs and benefits over a 5-year period. Year 1 (t=0) Year 2 Year 3 Year Year 5 Costs 100 5 5 8 10 Benefits 15 40 40 35 30 Find the present value of the investment using a 10% discount rate. Find the present value of the investment using...

In 1997 Michelle Green started Green-Log Manufacturing, a company dedicated to manufacturing environmental friendly man made...

In 1997 Michelle Green started Green-Log Manufacturing, a company dedicated to manufacturing environmental friendly man made logs that can be burned in fire places, fire pits in the backyard, and when camping. The logs are made from environmental friendly products like cardboard and clean wax and emit fewer greenhouse gases and less harsh chemicals. The logs come in three pound and five pound sizes. Green-logs are also available with citronella to ward off mosquitos. The Green-Logs have been well received....

QUESTION 4 KAM Ltd (KAM) is a private company in the electronics industry. The company has...

QUESTION 4 KAM Ltd (KAM) is a private company in the electronics industry. The company has grown steadily since its incorporation in 1997 and is seeking public listing in the next financial year. KAM prepared its financial statements under International Financial Reporting Standards (IFRS). You work in the finance department of KAM and are currently working on the financial statements for the year ended 30 April 2020. In order to gain maximum interest from the market when shares are offered...

Question 1 M & M (Pvt) Ltd, a small entity in the mining industry is involved...

Question 1 M & M (Pvt) Ltd, a small entity in the mining industry is involved in operations that result in the company having stocks of cash resource. The company has thus decided to create a portfolio of investments comprising of agriculture notes, a debt instrument, and ordinary shares of a company that is into telecommunications. The intended investment in Agriculture Notes is sixty percent and the remainder in ordinary shares. Forecasts have shown the following possibilities in as far...

QUESTION 4 Enrich Corporation is a battery manufacturing plant in the United States. The company...

QUESTION 4 Enrich Corporation is a battery manufacturing plant in the United States. The company confirmed that it was planning to open factories in Britain and Australia. Supposed the spot exchange rate for Australian dollar is A$1.42 = $1, while the British pound exchange rate is £1 = $1.30. The inflation rate in the United States will be 2.9 percent per year, Britain 3.5 percent and 4.5 percent in Australia. You as one of the finance department team need...

QUESTION 4 Company ABC is a manufacturing company specialized in three auto parts denoted by X,...

QUESTION 4 Company ABC is a manufacturing company specialized in three auto parts denoted by X, Y, and Z respectively. The company is preparing for the budgets for the next year and has collected the following information: X Y Z Raw materials costs /unit $20 $30 $40 Labor hours needed /unit 0.3 0.2 0.1 Machine hours needed /unit 0.5 1 0.9 Market demand in units 10,000 20,000 15,000 Price in $ $55 $70 $85 The company allocates $10 of variable...

X Ltd and Y Ltd decide to establish a new entity, Z Ltd. The purpose of...

X Ltd and Y Ltd decide to establish a new entity, Z Ltd. The purpose of Z Ltd is to develop and market a new car seat designed for use by babies when travelling in a car. X Ltd and Y Ltd have specific roles in the new company and have unilateral ability to make all decisions in relation to their specified roles. X Ltd has agreed that it will be responsible for developing the new car seat and obtaining...

Subjects