- - n . Q Search the web.. a W F How T SE X Parapt # Comp G Evalue H The To | The Rc .| Corpo ) The Lil | Queer | & Full de | 2 - VIeR G Evalue G a. Calc Course + X C A library.qol.qub.ac.uk/exampapers/Papers/ACC/ACC2005/ACC2005_2101ES2_1_147.pdf Q To . .. E SECTION A (answer ONE question from this section) 5 / 6 89% + Total 25 Marks Question 5 Avery Enterprise is keen to expand the company's product range and has identified two manufacturers as possible acquisition in the engineering field (although it will only choose a maximum of one manufacture): Holland and Goodman. These companies are both relatively young and have invested heavily in new technology in the exact area of engineering in which Avery is interested (although, to date, neither company has been profitable). Holland produces 'Assembly A' which sells at $14,000, while Goodman produces 'Assembly B' that sells for $11,250. Budgeted production, selling and administration costs associated with Assembly A (Holland) and Assembly B (Goodman) for next year are as follows: Holland Goodman - Assembly A - Assembly B Variable costs (per unit) : E E Production 8,500 7,000 Selling 1,260 625 Fixed costs (total): E million E million Production 27.8 25.8 Selling 7.2 3 Administration 10.4 7.1 Cont.d... Activate Windows Go to Settings to activate Windows.- - n . Q Search the web.. a W F How T SE X Parapt # Comp G Evalue H The To | The Rc .| Corpo ) The Lil | Queer | & Full de | 2 - VIeR G Evalue G a. Calc * Course + X C A library.qol.qub.ac.uk/exampapers/Papers/ACC/ACC2005/ACC2005_2101ES2_1_147.pdf Q To . .. E SECTION A (answer ONE question from this section) 6 / 6 89% + Budgeted sales volumes for next year are as follows: Holland - Assembly A Goodman - Assembly B Sales volume Probability Sales volume Probability 10,000 0.05 10.000 0.05 12,000 0.15 12,000 0.10 14,000 0.20 14,000 0.40 16,000 0.25 16,000 0.40 18,000 0.35 18,000 0.05 At present, negotiations regarding acquisition are at a fairly advanced stage and Avery's team believes that Holland could be acquired for $110 million, whereas Goodman would cost $70 million. Requirement a. Calculate the expected profitability of both the Holland and the Goodman proposals, indicating also the range of possible profit outcomes, and comment briefly on how these figures may influence the acquisition decision. 16 Marks b. Calculate the return on investment and the breakeven sales volume and sales value figures for the company as a whole for the two options, and comment briefly on how these figures may influence the acquisition decision. 9 Marks Total 25 Marks Activate Windows Go to Settings to activate Windows