Marpi Ltd is a company that specialises in the covering of fresh fruit with chocolate. Thanks...

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Marpi Ltd is a company that specialises in the covering of fresh fruit with chocolate. Thanks to the development of new technologies, Marpi has diversified its range of products and next year will invest £500.000 and launch on the market a new product. "Ciokfruit: Selected fruits covered with chocolate in boxes. The assumptions for a monthly production of 47,000 boxes of Cioldrult are the following: Fruit Other Materials Direct Labour E 16,000 19,000 20,000 Electricity Distribution & Marketing Other Fixed Costs 43,500 Electricity is 30% fixed and 70% variable. Distribution and Marketing are 40% fixed and 60% variable. The selling price for each box of Ciokfruit is £2.50 7,000 5.000 You are required to: 1) Calculate the total fixed costs per month, the variable costs per unit, the contribution per unit, the break-even point and the margin of safety (MOS) in units and discuss these results briefly. [13 marks] (ii) Total variable costs (i) Total costs. 2) Accurately draw a graph showing the following: (1) Fixed costs (iv) Total revenue (v) Break-even point. (vi) Margin of safety Make sure you label your work and provide reasonable axis labelling [5 marks] 3) How many units of Ciokfruit need to be sold monthly to achieve a yearly ROCE of 12%. [5 marks] 4) Show the effect on operating income if the sales price is reduced from the current £2.50 to £2.30 per unit and number of sales units increases by 25%, as foreseen by market research carried out by the marketing department. Demonstrate the difference (in £ and %) with the original scenario. [10 marks] 5) Calculate the minimum acceptable selling price per unit if Marpi Ltd accepts a one-off contract to produce an additional 2,500 units. The following adjustments should be made: a specific delivery cost of £0.12 per unit will occur all variable distribution and marketing costs will be replaced with a single payment of £1,000 related to this contract. [5 marks] 6) Explain why breakeven analysis can only work if there is a single product (or a constant mix of products), and explain four other drawbacks of breakeven analysis. [12 marks] Marpi Ltd is a company that specialises in the covering of fresh fruit with chocolate. Thanks to the development of new technologies, Marpi has diversified its range of products and next year will invest £500.000 and launch on the market a new product. "Ciokfruit: Selected fruits covered with chocolate in boxes. The assumptions for a monthly production of 47,000 boxes of Cioldrult are the following: Fruit Other Materials Direct Labour E 16,000 19,000 20,000 Electricity Distribution & Marketing Other Fixed Costs 43,500 Electricity is 30% fixed and 70% variable. Distribution and Marketing are 40% fixed and 60% variable. The selling price for each box of Ciokfruit is £2.50 7,000 5.000 You are required to: 1) Calculate the total fixed costs per month, the variable costs per unit, the contribution per unit, the break-even point and the margin of safety (MOS) in units and discuss these results briefly. [13 marks] (ii) Total variable costs (i) Total costs. 2) Accurately draw a graph showing the following: (1) Fixed costs (iv) Total revenue (v) Break-even point. (vi) Margin of safety Make sure you label your work and provide reasonable axis labelling [5 marks] 3) How many units of Ciokfruit need to be sold monthly to achieve a yearly ROCE of 12%. [5 marks] 4) Show the effect on operating income if the sales price is reduced from the current £2.50 to £2.30 per unit and number of sales units increases by 25%, as foreseen by market research carried out by the marketing department. Demonstrate the difference (in £ and %) with the original scenario. [10 marks] 5) Calculate the minimum acceptable selling price per unit if Marpi Ltd accepts a one-off contract to produce an additional 2,500 units. The following adjustments should be made: a specific delivery cost of £0.12 per unit will occur all variable distribution and marketing costs will be replaced with a single payment of £1,000 related to this contract. [5 marks] 6) Explain why breakeven analysis can only work if there is a single product (or a constant mix of products), and explain four other drawbacks of breakeven analysis. [12 marks]

Answer rating: 100% (QA)

1 Cost Analysis Total Fixed Costs per month 43500 Distribution Marketing 6000 Other Fixed Costs 49500 Total Variable Costs per unit 18000 Fruit 19000 Other Materials 20000 Direct Labour 2100 Electrici... View the full answer