The summarized profit and loss statement for Ex plc for the last year is as follows:...
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The summarized profit and loss statement for Ex plc for the last year is as follows: Tshs. (000) Tshs. (000) Sales (50,000 units) Direct materials Direct wages Fixed production overhead Variable production overhead Administration overhead Selling and distribution overhead Profit/(loss) 35,000 20,000 20,000 5,000 18,000 12,000 100,000 110,00 (10,000) At a recent board meeting the directors discussed the year's results, following which the chairman asked for suggestions to improve the situation. REQUIRED: a) Pay salesmen a commission of 10 percent of sales and thus increase sales to achieve break-even point b) Reduce selling price by 10 percent, which it is estimated would increase sales volume by 30 percent c) Increase direct wage rates from Tshs. 400 to Tshs. 500 per hour, as part of a productivity/pay deal. It is hoped that this would increase production and sales by 20 percent, but advertising costs would increase by Tshs. 5,000,000 The summarized profit and loss statement for Ex plc for the last year is as follows: Tshs. (000) Tshs. (000) Sales (50,000 units) Direct materials Direct wages Fixed production overhead Variable production overhead Administration overhead Selling and distribution overhead Profit/(loss) 35,000 20,000 20,000 5,000 18,000 12,000 100,000 110,00 (10,000) At a recent board meeting the directors discussed the year's results, following which the chairman asked for suggestions to improve the situation. REQUIRED: a) Pay salesmen a commission of 10 percent of sales and thus increase sales to achieve break-even point b) Reduce selling price by 10 percent, which it is estimated would increase sales volume by 30 percent c) Increase direct wage rates from Tshs. 400 to Tshs. 500 per hour, as part of a productivity/pay deal. It is hoped that this would increase production and sales by 20 percent, but advertising costs would increase by Tshs. 5,000,000
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To evaluate the three suggestions for improving the companys situation we need to calculate the impact of each proposal on the profit and loss statement Lets go through each suggestion Given data Sale... View the full answer
Related Book For
Management Accounting
ISBN: 978-0132570848
6th Canadian edition
Authors: Charles T. Horngren, Gary L. Sundem, William O. Stratton, Phillip Beaulieu
Posted Date:
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