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Required: You need to evaluate the proposals by showing all the relevant workings and present this at the Board of Directors meeting next month. Write a report to the Board of Directors by providing the analysis of all four proposals above.

Required: You need to evaluate the proposals by showing all the relevant workings and present this at the Board of Directors meeting next month. Write a report to the Board of Directors by providing the analysis of all four proposals above.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sale (50 000 units) Direct materials Direct wages Fixed production overhead Variable production overhead Administration overhead Selling and distribution overhead Profit/(loss) ii. (£000) iii. 350 200 200 50 180 120 (£000) 1,000 There are several proposals that have been gathered for consideration: i. Pay salesmen a commission of 10 percent of sales and thus increase sales to achieve break-even point. 1,100 (100) Reduce selling price by 10 percent, which would increase sales volume by 30 percent. Increase direct wage rates by 25 percent per unit, as part of a productivity deal. It is projected that this would increase production and sales unit by 20 percent, and advertising costs would also increase by £50,000. iv. Increase sales by having additional advertising of £300,000, with an increased selling price of 20 percent whilst setting a profit margin of 10 percent. Required: You need to evaluate the proposals by showing all the relevant workings and present this at the Board of Directors meeting next month. Write a report to the Board of Directors by providing the analysis of all four proposals above.
Transcribed Image Text:Sale (50 000 units) Direct materials Direct wages Fixed production overhead Variable production overhead Administration overhead Selling and distribution overhead Profit/(loss) ii. (£000) iii. 350 200 200 50 180 120 (£000) 1,000 There are several proposals that have been gathered for consideration: i. Pay salesmen a commission of 10 percent of sales and thus increase sales to achieve break-even point. 1,100 (100) Reduce selling price by 10 percent, which would increase sales volume by 30 percent. Increase direct wage rates by 25 percent per unit, as part of a productivity deal. It is projected that this would increase production and sales unit by 20 percent, and advertising costs would also increase by £50,000. iv. Increase sales by having additional advertising of £300,000, with an increased selling price of 20 percent whilst setting a profit margin of 10 percent. Required: You need to evaluate the proposals by showing all the relevant workings and present this at the Board of Directors meeting next month. Write a report to the Board of Directors by providing the analysis of all four proposals above.
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