[KS21]

That seems so obvious now. Sometimes I manage to understand and succeed in complicated stuff, only to then be stuck on something so basic. Thank you very much for responding, sir. Happy New Year.

[KS21]

Hi John, hope you had a great Christmas. Let me just say thanks for responding and for your work, your lectures helped me succeed in the CIMA BA3 exam recently. Absolute legend.

Here is the entire question (I know how to answer and revise for the others, I am just stuck on C, I don’t know what revision video/topic to look at to help me understand):

The Garden Company Plc (GC) manufactures garden furniture selling directly to garden centres and DIY stores. The three products that are currently in production are chairs, tables and sun loungers. The board of directors are looking at the forecasted sales for the year ahead and have summarised the following information:

Product: Garden Chairs Garden Tables Sun Loungers
Sales Volume (units) 48,000 12,000 15,000
Sales Price / unit £48.00 £150.00 £250.00
Variable Cost / unit £25.00 £70.00 £150.00

Total Fixed Costs: £3,000,000

To achieve the Company’s profitability targets and meet shareholder expectations the directors are aiming to achieve a profit in excess of £1,000,000.

Required:

a) Calculate GC’s total operating profit based on the expected sales volumes.
(5 marks)

b) Calculate the sales mix required in both units and revenue to achieve £1,000,000 profit.
(10 marks)

c) A distributor believes he can increase sales of Sun Loungers by 25% if GC launches a regional advertising campaign. The cost of the campaign is £150,000. Recalculate profits based on the increased sales and advertising costs and state if the proposal should go ahead.
(5 marks)

d) State the benefits of using cost volume profit analysis in manufacturing organisations.

[Author]

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