Manufactures car alarms Essay

CostsMaterials direct, variable1,600 boil direct, variable960Labour indirect, pertinacious280Other production overheads variable400Other production overheads fixed640Selling overheads variable480Selling overheads fixed360 dispersal overheads variable280Distribution overheads fixed120Administration overheads fixed600(5,720)Net loot for the yr1,480Anhad is planning next yrs activity and its forecasts for the year ended 31 October 2014 are as follows 1.A reduction in selling price per car affright to RM8 per alarm is expected to outgrowth gross revenue volume by 50%. 2.Materials cost per unit will remain unchanged, but 5% quantity displace will be obtained. 3.Hourly direct wage rates will growing by 10%, but labour efficiency will be unchanged. 4.Variable selling overheads will increase in total in product line with the increase in sales revenue. 5.Variable production and distribution overheads will increase in line with the 50% increase in sales volume. 6.All fixed be will in crease by 25%.You are necessary to do the followinga)Prepare a budgeted profit statement for the year to 31 October 2014 showing total sales and marginal costs for the year and overly contribution and interlocking profit per unit.b)Calculate the break-even point for the ii years and inform why thebreak-even point has changed. Comment on the margin of safety in both years.c)Calculate the sales volume required (using the new selling price) to come across the same profit in 2014 and in 2013.d)A director comments that with these figures, all we suck to do to work out our budgeted profit is to multiply the net profit per unit by the units we want to sell. Why is this statement irrational?Satnam Berhad is considering diversifying their business activities and they are currently reviewing two proposals. Proposal A is to order their own television station whilst Proposal B is a pin venture with Kaboor Limited to launch a satellite that would enable the African region to receive ad vertisements for both companys products.The available selective information is followsProposal A TV StationInitial set-up costs RM250 billionAnnual running costs RM100 millionEstimated life of project 5 yearsValue of assets released at the end of the project RM40 million change magnitude sales as a result of advertising products RM60 million in the first year, growing cumulatively by 50% each year for the following four years.Project B SatelliteInitial set-up costs RM700 millionAnnual running costs RM50 millionValue of assets released at the end of the project RM10 million (Note all the above to be dual-lane 50/50 with Kaboor Limited)Estimated life of the project is 6 years.Increased sales for Satnam Berhad as a result of advertising their products in the African untarnished RM80 million in the first year, growing cumulatively by 20% each year for the following five years.Funding for both projects would be at a cost of capital of 6%.Relevant dissolve factors at 6% p.a. areYea r Cumulative10.9430.94320.8901.83330.8402.67340.7923.46550.7474.21260.7054.917Requireda)Using the net present value method of investment appraisal, critically evaluate the two proposals and make your recommendation to Satnam Berhad.b)What other considerations should Satnam Berhad take into account in decision making which Project to pursue?