Maurice Tutor

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    Argosy University/ Phoniex University/
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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 03 Feb 2018 My Price 8.00

Alaka Abayomi Plc

Alaka Abayomi Plc manufactures and sells a single product. The following data have been extracted from the current year?s budget:

Contribution per unit

N8

Total weekly fixed costs

N10,000

Weekly profit

N22,000

Contribution to sales ratio

40%

The company?s production capacity is not being fully utilized in the current year and three possible strategies are under consideration. Each strategy involves reducing the unit selling price on all units sold with a consequential effect on the budgeted volume of sales. Details of each strategy are as follows:

Strategy

Reduction in unit

Expected increase in weekly

 

selling price

sales volume over budget

 

%

%

A

2

10

B

5

18

C

7

25

The company does not hold stock of finished goods.

Required:

(a) Calculate for the current year:

(i) the selling price per unit for the product; and

(ii) the weekly sales (in units).

(b) Determine, with supporting calculations, which one of the three strategies should be adopted by the company in order to maximize weekly profits.

(c) Briefly explain the practical problems that a management accountant might encounter in separating costs

 

Answers

Maurice Tutor
(5)
Status NEW Posted 03 Feb 2018 07:02 PM My Price 8.00

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