A company is planning to improve its profit level at least by 10% from the preliminary...
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A company is planning to improve its profit level at least by 10% from the preliminary budget estimates of a profit Y of 32, 80,000 for the coming year. It has worked out the following profit improvement plan: i. In the year just concluded the sales of the company were 10% of the total market of 12,00,000 units. For the preparation of the original budget estimate, the same market demand and the same share of market for the company was envisaged. Now it has been estimated that the total market demand will increase by 18% and the company's market share will increase to 11% from the present level of 10%. ii. The products are sold in two sizes - - large and medium. The sales mix of each size was 50:50 so far. Now it is planned that the sales will be 40% of large and 60% of medium. The medium packs and large packs have a contribution of 10 and '8 per pack respectively. The budget proposes to raise the price in such a manner that the contribution per pack will increase by 0.60 for each size. iii. There will be an additional expenditure on sales promotion worth 78,000. iv. The company proposes to save '9,000 by saving on interest cost in the coming year by better financial management. You are required to draw a profit improvement plan in financial terms and spell out separately the effect of various factors on profit. A company is planning to improve its profit level at least by 10% from the preliminary budget estimates of a profit Y of 32, 80,000 for the coming year. It has worked out the following profit improvement plan: i. In the year just concluded the sales of the company were 10% of the total market of 12,00,000 units. For the preparation of the original budget estimate, the same market demand and the same share of market for the company was envisaged. Now it has been estimated that the total market demand will increase by 18% and the company's market share will increase to 11% from the present level of 10%. ii. The products are sold in two sizes - - large and medium. The sales mix of each size was 50:50 so far. Now it is planned that the sales will be 40% of large and 60% of medium. The medium packs and large packs have a contribution of 10 and '8 per pack respectively. The budget proposes to raise the price in such a manner that the contribution per pack will increase by 0.60 for each size. iii. There will be an additional expenditure on sales promotion worth 78,000. iv. The company proposes to save '9,000 by saving on interest cost in the coming year by better financial management. You are required to draw a profit improvement plan in financial terms and spell out separately the effect of various factors on profit.
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Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
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