The following information relates to Meres budget for the year to 31 December 2018: The directors are

Question:

The following information relates to Mere’s budget for the year to 31 December 2018: 

The directors are worried about the loss that product M is budgeted to make and various suggestions have been made to counteract the loss, viz.: 

● Stop selling product M;

● Increase M’s selling price by 20 per cent;

● Reduce M’s selling price by 10 per cent;

● Reduce its costs by purchasing a new machine costing £350,000, thereby decreasing the direct labour cost by £100,000 (the machine would have a life of five years; its residual value would be nil).


Required:

Evaluate each of these proposals. 

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Accounting For Non-Accounting Students

ISBN: 9781292128979

9th Edition

Authors: John R. Dyson, Ellie Franklin

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