• · Sales staff: 2 positions, $40,000 annual salary each [including superannuation].
• · Office furniture: Cost $75,000; expected residual $0; useful life 8 years; depreciation method straight-line; installed on 1 July 2020.
• · Factory equipment: Cost $775,000; expected residual $25,000; useful life 8 years; depreciation method straight-line; installed ready for use 31 July 2020.
• · Computers: Cost $65,000; expected residual $0; useful life 4 years; depreciation method reducing balance; installed ready for use 15 July 2020.

Loan from Big Bank

Banana Industries will borrow $300,000 at 4.5% p.a. compounding monthly. Repayments will be made each month, over a four-year loan term. The loan start date will be 1 July 2020.

Scenario #2

The marketing department at Banana Industries believes that by selling a slightly higher quality webcam system, a higher price and mark-up would be acceptable in the market. They have estimated that with an increased cost per unit [$3900] a mark-up of 70% would be achievable. To support this price increase, marketing and advertising expenditure would increase from 8% to 11%. Annual sales are expected to increase by 10 units compared to scenario #1.

Task to do

I have already done part a excel work. If any one can help me in part B.






 

• Question Part B
• 1) Advise your client on which scenario should be selected. Explain and justify why you would advise this selection
• 2)Comment on any variances between the scenarios
• 3) Explain the difference between straight-line depreciation and reducing balance depreciation to your clients
• 4) Prepare break-even analysis on the scenario you recommended in part B[1] above:
• a. Calculate the break even analysis mathematically.
• b. Show the break even analysis graphically.
• c. Explain break-even analysis and why it is an important tool for business.
• 5) Produce a Pie Graph showing the break-up of all expenses in the under the scenario recommended in part B[1] above. Comment on the pie graph
• 6) From your analysis provide your recommendation to the client with supporting evidence.
•  

Transcribed Image Text:

Scenario Planning Depreciation Calculations Inte Projected Projected Profit and Loss: 2020-21 Scenario 1 (S) Scenario 2 (S) Unit Calculations Cost of Goods (per unit) Mark up 3750 3900 65% 70% Sales Price (GST Excl) GST 6,187.50 10% 6,630.00 10% Sales Price (GST incl) 6,806.25 7,293.00 Number of Units 410 420 Revenue $2,536,875 $2,784,600 Less: Cost of Goods Sold 1,537,500 1,638,000 GROSS PROFIT 999,375 1,146,600 Expenses Wages [sales staff] 80,000 80,000 Commission 101,475 111,384 Wages [admin staff] Depreciation - Factory equipment Depreciation - Computers Depreciation - Office fit out Marketing 190,000 190,000 85,938 85,938 15,573 15,573 9,375 9,375 202,950 306,306 Rent 144,000 144,000 Operating costs Delivery costs 66.000 66,000 53,300 54,600 Interest 12,067 12,067 TOTAL EXPENSES 960,678 1,075,243 NET PROFIT 38,697 71,357 Company Tax Rate Company Tax Payable 26.0% 26.0% 10,061 18,553 NPAT 28,636 52,804 Scenario Planning Depreciation Calculations Inte Projected Projected Profit and Loss: 2020-21 Scenario 1 (S) Scenario 2 (S) Unit Calculations Cost of Goods (per unit) Mark up 3750 3900 65% 70% Sales Price (GST Excl) GST 6,187.50 10% 6,630.00 10% Sales Price (GST incl) 6,806.25 7,293.00 Number of Units 410 420 Revenue $2,536,875 $2,784,600 Less: Cost of Goods Sold 1,537,500 1,638,000 GROSS PROFIT 999,375 1,146,600 Expenses Wages [sales staff] 80,000 80,000 Commission 101,475 111,384 Wages [admin staff] Depreciation - Factory equipment Depreciation - Computers Depreciation - Office fit out Marketing 190,000 190,000 85,938 85,938 15,573 15,573 9,375 9,375 202,950 306,306 Rent 144,000 144,000 Operating costs Delivery costs 66.000 66,000 53,300 54,600 Interest 12,067 12,067 TOTAL EXPENSES 960,678 1,075,243 NET PROFIT 38,697 71,357 Company Tax Rate Company Tax Payable 26.0% 26.0% 10,061 18,553 NPAT 28,636 52,804

Answer rating: 100% (QA)

Solution Part B 1 Scenario 2 has to be selected as it increases NPAT from 28636 to 52804 This increase is due to the decision by the managent to focus on higher quality webcams This results in increas... View the full answer