MROLYAMU owns a large tree farm located at Usangi, Mwanga district. The farm has three types of trees depending on their use, the softwood, the hardwood and the furniture wood. MROLYAMU purchased the farm last year at the cost of TZS. 200,000,000 and the trees are at different stages of growth. MROLYAMU also owns different machines and equipment which are used for servicing the farm and are located at the firm site as follows:

Book value
TZS
Three harvester 35,288,000
Three planter 30,000,000
Water supply machine 20,000,000
Fumigation machine 1,000,000

MROLYAMU does not maintain formal books of account, but for the year ended 31st December 2017, the following information relating to farm operations were obtained:

i. The customers normally purchase the trees at the farm at the cost of TZS. 50,000, TZS. 100,000 and TZS.l20,000 per tree for softwood, hardwood and furniture wood trees respectively.

ii. The total sales and total costs incurred per month for the year 2017 are as follows: Month; Sales (TZS); Total Cost Incurred (TZS)

January ;42,000,000;. 36,000,000

February; 60,000,000; 46,000,000

March ;36,000,000; 33,792,000

April ; 84,000,000 ; 67,584,000

May 72,000,000 ; 62,000,000

June. 66,000,000 ;. 51,000,000

July 54,000,000; 40,000,000

August 54,000,000 ; 40,000,000

September 72,000.000 ;. 62,000,000

October 75,000,000 ; 63,000,000

November 69.000,000. ; 54,000,000

December 57,000,000. ;. 43,000,000

Total;. 741,000,000 ; 598,376,000

Basing on sales trend, MROLYAMU total sales can he divided into 500 softwoods trees. 30% hardwoods trees and 200o furniture wood trees.

Required:

(a) MROLYAMU is worried about the profitability of the farm and wishes to know the minimum number of wood trees that he should sale to recover the operating costs. Assuming that the variable costs per unit of maintaining different types of wood trees in the farm is the same:

i. Determine the number of each type of wood tree that MROLYAMU should sell to breakeven. 

ii. If MROLYAMU wants to achieve a targeted profit of TZS. 186,000,000/= determine the number of each type of wood trees that should be sold. 

(b) The year 2017 wood harvest was the first since MROLYAMU purchased the farm. MROLYAMU is worried as to whether all three wood trees are equally profitable to be maintained or phase out unprofitable and maintain profitable ones. Basing on the information obtained above, assess the profitability of each type of wood tree and comment
on the wood product to maintain or to be phased out if any.

Answer rating: 100% (QA)

Date is No of unitts s0ld of each type of wod C treet to break... View the full answer