Please answer Question 3 4 5 6 7 PART 1 Funai Corporation is

PART 1 Funai Corporation is a Japanese manufacturer of video cassette recorders (VCRs) and was established in 1987. There is now increased competition in its markets and the firm expects to find it difficult to make an acceptable profit next year. You have been appointed as a management accountant at the company, and have been given a copy of the draft budget for the next financial year. Draft Budget for 12 months to 30th September 2019 (Em) (Em) 960 Sales revenue Cost of sales Variable assembly materials Variable labour Factory overheads-variable 374.4 192 172.8 fixed 43 (782.2) Gross profit Selling overhead -commission (variable) 38.4 108 - fixed Administration overhead - fixed Net profit 20 (166.4) 11.4 The following information is also supplied to you by the firm\'s financial controller, John Smith: a) Planned sales for the draft budget in the year to 30th September 2019 are expected to be 25% less than the total of 3.2 million VCR units sold in the previous financial b) The firm operates a Just-in-time stock control system, which means that it holds no unt c) If more than 3 million VCR units are made and sold, the unit cost of material falls by d) Sales commission is based on the number of units sold and not on turnover. year. stocks of any kind. £4 per unit

Solution

Draft budget for 12 months to 30 th september 2019 (?m) (?m) Sales revenue 960 Cost of sales Variable assembly materials 374.4 Variable labor 192 Factory overheads-Variable 172.8 Factory overheads-fixed 43 -782.2 Gross profit 177.8 Selling overhead-commission (Variable) 38.4 Selling overhead-commission (Fixed) 108 Administration overhead-Fixed 20 -166.4 Net profit 11.4 1) Selling price per unit: Units sold in last year=3.2 million Units projected in next year=3.2*75%=2.4 million Selling price per unit=960/2.4=?400 per unit 2) Variable assembly materials per unit=374.4/2.4=?156 per umit 3) Variable labor per unit=192/2.4=?80 per unit 4) Factory overheads variable per unit=172.8/2.4=?72 per unit 5) Selling commission per unit=38.4/2.4=?16 per unit 3.1) (?m) (?m) Sales revenue 960 Cost of sales Variable assembly materials (2.64*156) 411.84 Variable labor (2.64*80) 211.2 Factory overheads-Variable (2.64*72) 190.08 Factory overheads-fixed 43 -856.12 Gross profit 103.88 Selling overhead-commission (Variable) (2.64*18) 47.52 Selling overhead-commission (Fixed) 108 Administration overhead-Fixed 20 Advertising expense 14 -189.52 Net profit -85.64 Profit as per draft budget=?11.4 million Decrease in net income=11.4+85.64=?97.04 million 3.2) Break even point in units=Fixed cost/contribution margin per unit Fixed cost Factory overheads-fixed 43 Selling overhead-commission (Fixed) 108 Administration overhead-Fixed 20 Advertising expense 14 Total 185 Contribution margin per unit=Sales price per unit-Variable cost per unit Variable cost per unit: Variable assembly materials 156 Variable labor 80 Factory overheads-Variable 72 Selling overhead-commission 18 Total 326 Contribution margin per unit=400-326=? 74 per unit Break even point in units=185/74=?2.5 million units Break even point in sales revenue=2.5*400=?1000 million 4.1) (?m) (?m) Sales revenue (3.2*380) 1216 Cost of sales Variable assembly materials (3.2*152) 486.4 Variable labor (3.2*80) 256 Factory overheads-Variable (3.2*72) 230.4 Factory overheads-fixed 43 -1015.8 Gross profit 200.2 Selling overhead-commission (Variable) (3.2*16) 51.2 Selling overhead-commission (Fixed) 108 Administration overhead-Fixed 20 -179.2 Net profit 21 Revised selling price=400*95%=?380 per unit Revised sales volume=3.2 million units Revised variable assembly materails per unit=156-4=?152 per unit (if more than 3 million VCR units are made and sold,unit cost of materials fall by ?4 per unit) Increase in net profit=21-11.4=?9.6 million 4.2) Break even point in units=Fixed cost/contribution margin per unit Fixed cost Factory overheads-fixed 43 Selling overhead-commission (Fixed) 108 Administration overhead-Fixed 20 Total 171 Contribution margin per unit=Sales price per unit-Variable cost per unit Variable cost per unit: Variable assembly materials 152 Variable labor 80 Factory overheads-Variable 72 Selling overhead-commission 16 Total 320 Contribution margin per unit=380-320=? 60 per unit Break even point in units=171/60=?2.85 million units Break even point in sales revenue=2.85*380=?1083 million 5.1) (?m) (?m) Sales revenue (3.8*360) 1368 Cost of sales Variable assembly materials (3.8*152) 577.6 Variable labor (3.8*80) 304 Factory overheads-Variable (3.8*72) 273.6 Factory overheads-fixed 43 -1198.2 Gross profit 169.8 Selling overhead-commission (Variable) (3.8*16) 60.8 Selling overhead-commission (Fixed) 63 Administration overhead-Fixed 20 -143.8 Net profit 26 Revised selling price=400*90%=?360 per unit Revised sales volume=3.8 million units Revised fixed selling overhead=108-45=?63 million Increase in net profit=26-11.4=?14.6 million 5.2) Break even point in units=Fixed cost/contribution margin per unit Fixed cost Factory overheads-fixed 43 Selling overhead-commission (Fixed) 63 Administration overhead-Fixed 20 Total 126 Contribution margin per unit=Sales price per unit-Variable cost per unit Variable cost per unit: Variable assembly materials 152 Variable labor 80 Factory overheads-Variable 72 Selling overhead-commission 16 Total 320 Contribution margin per unit=360-320=? 40 per unit Break even point in units=126/40=?3.15 million units Break even point in sales revenue=3.15*360=?1134 million 6) Proposal C should be accepted since it results in increase of net income by ?14.6 million