Mango Ltd produces several types of skin cream. You following expected average weekly information for Jun £ Sales 3 Ingredients 6,050 Staff 11,550 Electricity 3,100 Factory rent 3.600
Mango Ltd produces several types of skin cream. You following expected average weekly information for Jun £ Sales 3 Ingredients 6,050 Staff 11,550 Electricity 3,100 Factory rent 3.600
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Mango Ltd produces several types of skin cream. You have been provided with the
following expected average weekly information for June.
£
£
Sales
33,000
Ingredients
6,050
Staff
11,550
Electricity
3,100
Factory rent
3,600
(24,300)
Profit
8,700
The average skin cream sells for £6 per unit. All costs are variable costs except
for electricity costs which are semi-variable with a fixed element of £2,000 per
week and factory rent, which is fixed.
In July, the average selling price per skin cream is expected to stay the same
as June, but the sales volume is expected to be 15% higher than June.
Contribution in July is expected to be £2.40 per skin cream and fixed costs are
expected to total £5,700.
In August, Mango Ltd considers selling some of the skin creams in smaller
portions called mini-pots, in addition to the usual skin creams. It estimates
that 1,200 mini-pots could be sold each week at £3 per mini-pot. The variable
cost of each mini-pot would be
£1.40. Incremental fixed costs per week would be £1,100. All other revenue
and cost data for the existing skin creams is the same as in July.
Poor weather conditions have led to a worldwide shortage of coconut oil which
is a key ingredient in all the skin creams. In November only 215,800 ml of
coconut oil will be available. You have been given the following data for
November:
Skin Cream
Mini-pots
Pots
Contribution per pot
Coconut oil required per unit (ml)
£2.30
£1.10
40
22
Fixed costs
£5,600
£1,200
Maximum demand per week (units)
4,900
1,100
Requirement
(a) Calculate the number of pots of skin cream in JUNE that would need to
be sold to earn a profit of £11,000 per week.
(b) Calculate the margin of safety percentage per week for JULY (to the
nearest whole number).
(c) Calculate the additional profit or loss that Mango Ltd would earn per
week from introducing the mini-pots in AUGUST.
(d) Calculate the optimum number of pots of skin cream and mini- pots that
Mango Ltd should produce in order to maximise contribution per week in
NOVEMBER (round your answer to 2 decimal places)
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