14 marks Recast the year A I/s into the contribution margin [CM] format. Suppose sales are...

  

Transcribed Image Text:

14 marks Recast the year A I/s into the contribution margin [CM] format. Suppose sales are expected to decline by 10% next year (Year A is the current year). (i) Calculate OLE and TLE for Year A, the current year. (ii) Using OLE, what NOPAT should the company expect next year? Using TLE, what NI should the company expect next year? (ii) Now prepare the 1/S for next year using the CM format b. 12 marks Recast the year B I1/S into the contribution margin [CM] format. Suppose sales are expected to increase by 10% next year (Year B is the current year). (i) Calculate OLE and TLE for Year B, the current year. (ii) Using OLE, what NOPAT should the company expect next year? Using TLE, what NI should the company expect next year? (i) Now prepare the 1/S for next year using the CM format Year A Year B Sales $120,000 $150,000 CGS 80,000 90,000 60,000 42,500 GP 40,000 OPE 30,000 ЕBIT 10,000 17,500 Interest 2,000 2,000 8,000 3,200 EBT 15,500 Tax(40%) 6,200 $ 4,800 $ 9,300 NI Let TC (total op. cost) = CGS + OPE (operating cost). Then TC = Fixed + v*Sales Determine the parameters, fixed and v. [That is, estimate the underlying linear function] (4 marks) $110,000 $132,500 150,000 TC Sales 120,000 14 marks Recast the year A I/s into the contribution margin [CM] format. Suppose sales are expected to decline by 10% next year (Year A is the current year). (i) Calculate OLE and TLE for Year A, the current year. (ii) Using OLE, what NOPAT should the company expect next year? Using TLE, what NI should the company expect next year? (ii) Now prepare the 1/S for next year using the CM format b. 12 marks Recast the year B I1/S into the contribution margin [CM] format. Suppose sales are expected to increase by 10% next year (Year B is the current year). (i) Calculate OLE and TLE for Year B, the current year. (ii) Using OLE, what NOPAT should the company expect next year? Using TLE, what NI should the company expect next year? (i) Now prepare the 1/S for next year using the CM format Year A Year B Sales $120,000 $150,000 CGS 80,000 90,000 60,000 42,500 GP 40,000 OPE 30,000 ЕBIT 10,000 17,500 Interest 2,000 2,000 8,000 3,200 EBT 15,500 Tax(40%) 6,200 $ 4,800 $ 9,300 NI Let TC (total op. cost) = CGS + OPE (operating cost). Then TC = Fixed + v*Sales Determine the parameters, fixed and v. [That is, estimate the underlying linear function] (4 marks) $110,000 $132,500 150,000 TC Sales 120,000

Answer rating: 100% (QA)

TC Fixed cost V sales TC 20000 075 sales Explanation Variable cost to sales ratio Change in total cost Change in sales 132500 110000 150000 120000 225... View the full answer