Easely Doeslt Pty Ltd, trading as Easely Doeslt, makes four kinds of easels: small child, large...

     

  

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Easely Doeslt Pty Ltd, trading as Easely Doeslt, makes four kinds of easels: small child, large child, adult, and super adult. These casels are purchased directly by schools, kindergartens, adult education centres and other centres where painting and drawing takes place. As well, the easels are sold to retail centres where members of the public can buy them. The small child, large child and adult easels are all a relatively simple design, but the super adult easel has a variety of extra features. The special feature that makes EaselyDoeslt easels different from other easels is that the EaselyDoesit easel frame is made of a specially treated metal that is easy to clean, very hard to damage, and impervious to paint stains. EaselyDoes It easels are, effectively, indestructible. The cost accountant has observed that EaselyDoeslt sells these easels units in a consistent proportion as summarised in the Table BI below. It is now October 2023, and planning for the 2024 calendar year has commenced, with the expectation that, during the 2024 calendar year, Easely Does It will sell 12,500 small child casels, 25,000 large child easels. 10,000 adult easels and 2,500 super adult easels. The variable costs for each easel consist of four items: labour, treated metal, other material, and other variable costs. Information about the 2024 selling price and variable costs for each type of easel is set out below: Table B1: Sales, Selling price and Cost breakdown. Small child Large child Adult Super adult Proportion of Total Sales (in units) 25% Selling price 20% 3% 50% $90 $110 $75 $140 Variable labour per easel 0.5 hours Treated metal per casel Other materials per essel Other variable overhead per easel 0.25 hours 12 hours 02 hours 2.85 metres 3.3 metres 3.9 metres $3.50 $3 $2 3.9metres $4 $10.50 $2 $2.40 $2.00 The budgeted variable labour cost is $24 per hour and the budgeted treated metal cost is $8 per metre. 0 The projected income statement for EaselyDoesit for the calendar year 1 January 2024 to 31 December 2024 has been developed and is set out below in the Table below. Revenue Variable Costs Variable Labour Treated Metal Other Materials Variable Overhead Total Variable Costs Fixed Costs Factory Rent Fixed Labour Expense Depreciation Expense Fixed Overhead Total Fixed Costs Total Costs Operational Profit Finance Costs Profit Before Tax Table B2: Projected Income Statement Easely Doeslt Pty Ltd Projected Income Statement 1 January 2024 to 31 December 2024 Tax At 20% Profit After Tax Young Child Older Child Adult Adult Super All Products Total $ S $ S 937,500 2,250,000 1.100,000 350,000 75,000 120,000 48,000 285,000 660,000 312,000 37,500 87,500 40,000 25,000 24,000 50,000 422,500 917,500 424,000 S 4,637,500 4,637,500 30,000 273,000 78,000 1,335,000 191,250 105,500 1,904,750 1,904,750 26,250 6,500 140,750 96,000 240,000 75,000 84,000 495,000 2,399,750 2,237,750 80,000 2,157,750 431,550 1,726,200 Please note carefully: While you may use Excel to solve these questions any tables / solutions that you develop in Excel must be copied into your Word answer document. 1. Assuming that the proportion of total sales in units of the four easel types remains constant as set out above in the Table 12, what is the break-even number of small child, large child, adult and super adult for the year 1 January 2024 - 31 December 2024 for EaselyDoes It Pty Ltd.? (7 marks) 2. Assuming that the proportion of total sales in units of the four easel types remains constant as set out above in the Table 12, how many of each of the four products does EaselyDoeslt Pty Ltd need to sell in the year 1 January 2024- 31 December 2024 for Easely Does It Pty Ltd. to reach an after-tax profit of $2,000,000? (4 marks) 3. In the current economic climate, with rising prices for labour and for materials, the cost accountant is concerned that the budgeted income statement she has prepared may be too optimistic. Industry advice she has just received suggests that a variable labour cost of $25.60 per hour would be more realistic and that the fixed labour estimate should be increased by 4%. Moreover, the cost of the treated metal is likely to be $8.40 per meter. Assuming: I. the ratio of sales (in units) of the four easel types remains constant as set out above i.e., 25% of easels sold are small child, 50% of easels sold are large child, 20% of easels sold are adult, and 5% of easels sold are super adult, and II. Easely DoesIt does not increase its sale prices, and III. all other costs remain as set out in the original budget. a. Determine the break-even number of easels that need to be produced and sold given these new conditions. Easely Doeslt Pty Ltd, trading as Easely Doeslt, makes four kinds of easels: small child, large child, adult, and super adult. These casels are purchased directly by schools, kindergartens, adult education centres and other centres where painting and drawing takes place. As well, the easels are sold to retail centres where members of the public can buy them. The small child, large child and adult easels are all a relatively simple design, but the super adult easel has a variety of extra features. The special feature that makes EaselyDoeslt easels different from other easels is that the EaselyDoesit easel frame is made of a specially treated metal that is easy to clean, very hard to damage, and impervious to paint stains. EaselyDoes It easels are, effectively, indestructible. The cost accountant has observed that EaselyDoeslt sells these easels units in a consistent proportion as summarised in the Table BI below. It is now October 2023, and planning for the 2024 calendar year has commenced, with the expectation that, during the 2024 calendar year, Easely Does It will sell 12,500 small child casels, 25,000 large child easels. 10,000 adult easels and 2,500 super adult easels. The variable costs for each easel consist of four items: labour, treated metal, other material, and other variable costs. Information about the 2024 selling price and variable costs for each type of easel is set out below: Table B1: Sales, Selling price and Cost breakdown. Small child Large child Adult Super adult Proportion of Total Sales (in units) 25% Selling price 20% 3% 50% $90 $110 $75 $140 Variable labour per easel 0.5 hours Treated metal per casel Other materials per essel Other variable overhead per easel 0.25 hours 12 hours 02 hours 2.85 metres 3.3 metres 3.9 metres $3.50 $3 $2 3.9metres $4 $10.50 $2 $2.40 $2.00 The budgeted variable labour cost is $24 per hour and the budgeted treated metal cost is $8 per metre. 0 The projected income statement for EaselyDoesit for the calendar year 1 January 2024 to 31 December 2024 has been developed and is set out below in the Table below. Revenue Variable Costs Variable Labour Treated Metal Other Materials Variable Overhead Total Variable Costs Fixed Costs Factory Rent Fixed Labour Expense Depreciation Expense Fixed Overhead Total Fixed Costs Total Costs Operational Profit Finance Costs Profit Before Tax Table B2: Projected Income Statement Easely Doeslt Pty Ltd Projected Income Statement 1 January 2024 to 31 December 2024 Tax At 20% Profit After Tax Young Child Older Child Adult Adult Super All Products Total $ S $ S 937,500 2,250,000 1.100,000 350,000 75,000 120,000 48,000 285,000 660,000 312,000 37,500 87,500 40,000 25,000 24,000 50,000 422,500 917,500 424,000 S 4,637,500 4,637,500 30,000 273,000 78,000 1,335,000 191,250 105,500 1,904,750 1,904,750 26,250 6,500 140,750 96,000 240,000 75,000 84,000 495,000 2,399,750 2,237,750 80,000 2,157,750 431,550 1,726,200 Please note carefully: While you may use Excel to solve these questions any tables / solutions that you develop in Excel must be copied into your Word answer document. 1. Assuming that the proportion of total sales in units of the four easel types remains constant as set out above in the Table 12, what is the break-even number of small child, large child, adult and super adult for the year 1 January 2024 - 31 December 2024 for EaselyDoes It Pty Ltd.? (7 marks) 2. Assuming that the proportion of total sales in units of the four easel types remains constant as set out above in the Table 12, how many of each of the four products does EaselyDoeslt Pty Ltd need to sell in the year 1 January 2024- 31 December 2024 for Easely Does It Pty Ltd. to reach an after-tax profit of $2,000,000? (4 marks) 3. In the current economic climate, with rising prices for labour and for materials, the cost accountant is concerned that the budgeted income statement she has prepared may be too optimistic. Industry advice she has just received suggests that a variable labour cost of $25.60 per hour would be more realistic and that the fixed labour estimate should be increased by 4%. Moreover, the cost of the treated metal is likely to be $8.40 per meter. Assuming: I. the ratio of sales (in units) of the four easel types remains constant as set out above i.e., 25% of easels sold are small child, 50% of easels sold are large child, 20% of easels sold are adult, and 5% of easels sold are super adult, and II. Easely DoesIt does not increase its sale prices, and III. all other costs remain as set out in the original budget. a. Determine the break-even number of easels that need to be produced and sold given these new conditions.