• a. Prepre a table using Excel that shows the unit and total contributions as well as the profit if ToyCar continue with their initial budget plan. The table should show contribution for each product as well as total fixed cost to determine total profit. The model should show assumptions for sales volumes, selling price and total fixed costs separately and be capable of being sensitised to allow changes to those assumptions. You will be awarded marks for accuracy and completeness of the table, the ease of sensitising and the presentation of the table.
• b. Evalute the choices available to ToyCar and state which choice you would recommend. Your evaluation should include similar tables to that prepared in (a) above.
• c. From your knowledge of contribution analysis explain why, even if all three models had spare production capacity, it would make the most sense, if applying contribution analysis, to increase the sale and production of Silver rather than the other two models. (The word count for this question is 200 wrds.)
• d. Asume that ToyCar uses increasingly high-tech factories to produce high-volume runs of different products.
  • i. Shortly discuss the difficulty, in reality, of using marginal costing principles to work out the relevant unit costs of individual products manufactured in such factories.
  • ii. Describe a better alternative to working out relevant unit costs in such an environment. (The word count for this question is 200 wrds.)

ToyCar currently manufactures three types of electric cars: Bronze, Silver and Gold.

Budgeted fixed costs for the year ahead are 375,000. While Bronze and Gold trucks will be produced at near full manufacturing capacity, there is plenty of spare productive capacity in terms of Silver.

The following data shows the budgeted selling prices and volumes together with variable costs per unit for each of the models.

	Bronze	Silver	Gold
Sales Volume	15,620	13,850	1,870
Selling Price	1,900	2,600	3,200
Direct Materials	300	500	900
Direct Labour	250	450	650
Variable Overheads	250	350	500

Before the start of the year ahead, which brings with it the need to finalise planned production of the three cars, the directors are informed the Gold model has not been selling well. It is thought to be too expensive in the current market. ToyCar has decided it now has to make one of two choices:

1. drop the Gold model from their range
2. drop the selling price of the Silver model by 250, which market research indicates will increase the sales by 30% if the firm increases its overall advertising budget by 40,000.

If choice 1 is made, the labour cost that is currently used on the Gold model could then be transferred to increase the production of the Silver model.

Further information:

• i.Assume that all production is sold.
• ii.Any change in production of the Gold model incurs no new productive capacity or period cost.
• iii.Any increase in production of the Silver model incurs no extra production fixed costs.
• iv.Any increase in production of the Silver model would require no changes to variable costs.

Use a Spreadsheet for the master budget to allow the use of sensative anaylsis