Question

please i need the solve for A&B&C&D&E

ESPECIALLY B&C&D&E

Company Information

Wood Work Ltd manufacture specialist wood furniture and sell their products all over Saudi  Arabia. The company was established three  years ago in Jeddah and is performing well to date. Wood work Ltd have three main product lines; TV tables, dining table and chairs. The following financial information has been provided.  

Financial Information TV tables dining Tables Chairs Selling Price per unit SAR 1,000 SAR 5,000 SAR 700 Direct Materials (wood timber) cost SAR 50 SAR 50 SAR 50 Kg of wood timber required per unit 10 25 5 Direct Labour hour cost per unit SAR 30 SAR 30 SAR 30 Sales commission per item sold SAR 10 SAR 15 SAR 5 Variable manufacturing overhead per unit SAR 20 SAR 24 SAR 18 Number of labour hours per unit 3 4 2 Budgeted sales in units 300 200 450 Additional Information: Other costs: Production manager annual salary SAR 60,000 Annual marketing costs SAR 10,000 General Expenses SAR 5,000 Annual Fixed manufacturing overhead (excluding depreciation) SAR10,000 (20% relates to TV tables ) The company bought specialised equipment 3 years ago which cost SAR100,000. The useful life of this equipment is 10 years. Depreciation is allocated to manufacturing overhead expenses.   The company had 8 TV tables  and 100 kg of wood timber in stock at the end of June. Company policy is to maintain 20% of the following months sales level as closing inventory for finished goods. Company policy to maintain 25% of next months production needs as closing inventory for direct materials. Budgeted sales of handbags for the next six months are as follows: July August September October November December 40 35 20 20 20 20 Cash collections on sales are as follows: 30% in the month of sale 70% in the month following sale Receivables at the end of June were SAR 22,000 Cash payments on purchases are as follows: 60% in the month of purchase 40% in the following month Payables at the end of June were SAR 6,000 The closing cash balance in June 2017 was SAR 40,000 and it is company policy to maintain cash at this level at the end of each month. The company have access to a 4% bank loan of SAR 60,000 The company paid a dividend of SAR 40,000 in August Cash of SAR 50,000 was invested in the company by a private investor in September.

Requirement:

Your group has been employed as the management accountants for Fashion Designers Ltd and have been asked to prepare a report to the board of directors outlining the following:

Using the information above, calculate the following: (25marks)

Which product is performing the best?

Calculate the overall break-even point in sales value for the company and the break-even point in sales valuefor each product line.

If the selling price of TV tables  is increased to SAR 1,200 per unit, what will be the increase in overall profit.

What level of sales (value) must the company achieve to make a profit of SAR 1,500,000.

Using the original information presented, draw a CVP graph outlining the costs, break-even point and profit and loss area for Wood work Ltd and comment on the overall performance of the company.

The company is considering eliminating sales commission and increasing salaries by SAR40,000. Outline the implications of making this decision on the overall break-even point in sales value and the overall profit or loss for the company. Should the company proceed with this decision?.  

The company is considering discontinuing the manufacture of chairs and have asked you to advise them on this decision. (35% of annual marketing costs relate specifically to this product and SAR1,500 of general expenses is directly attributable to this product).              

Using the information above, prepare the master budget for TV tables  onlyfor the quarter ending 30^thSeptember 2014.  

The company are considering implementing a balanced scorecard system. Outline how this could be implemented in this company giving at least three performance measures for each perspective. Include in your answer the advantages and disadvantages of traditional budgeting and advise the company on whether you believe it is a good decision to implement ‘the balanced scorecard’ system in this company. (25marks)

Answer 1

The profitabiltiy of each product and total profit is presented below:

	TV tables	dining tables	Chairs	Total
Sales units	300	200	450
Selling price per unit	1,000	5,000	700
DM per unit	500	1,250	250
Direct labour cost per unit	90	100	10
variable manufacturing overhead	20	24	18
sales commission per unit	10	15	5
contribution margin per unit	380	3,611	417
Contribution margin	1,14,000	7,22,200	1,87,650	10,23,850
Fixed expenses
Manager salary				60,000
Marketing costs				10,000
Fixed manufacturing overhead				10,000
Depreciation				10,000
Net income				9,33,850

Dining tables is performing the best as it has the highest contribution margin amongst all the products.

Break even point = fixed expensses / contribution margin ratio

Break even point for company in sales value = 90000 / 0.63

= SAR 141,964

contribution margin ratio = total sales / total contribution margin

For break even sales for each product, we will divide the break even point for the company in sales mix ratio

	TV tables	dining tables	Chairs	Total
Sales	300	200	450	950
Sales mix	32%	21%	47%	1
Break even sales	44,831	29,887	67,246	1,41,964

The new profit with an increase in sales price of TV tables to SAR1200

	TV tables	dining tables	Chairs	Total
Sales units	300	200	450
Selling price per unit	1,200	5,000	700
DM per unit	500	1,250	250
Direct labour cost per unit	90	100	10
variable manufacturing overhead	20	24	18
sales commission per unit	10	15	5
contribution margin per unit	580	3,611	417
Contribution margin	1,74,000	7,22,200	1,87,650	10,83,850
Fixed expenses
Manager salary				60,000
Marketing costs				10,000
Fixed manufacturing overhead				10,000
Depreciation				10,000
Net income				9,93,850

Therefore increase in profit = 993850 - 933850

= SAR 60,000

Level of sales to achive desired profit of SAR 15,00,000 = (fixed expenses + desired profit) / contribution margin ratio

= (90000 + 1500000) / 0.63

= SAR 25,23,810