June 15 Merkland Sportswear

This topic has 4 replies, 2 voices, and was last updated 8 years ago by Ken Garrett.

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May 15, 2017 at 6:20 am #386196
Tan
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Hi Sir,
For Q1 (ii), when we are required to calculate the number of units to cover the lost operating profit, why audit costs (0.5) and marketing campaign (0.8) are not included in calculating return from each unit?
May 15, 2017 at 9:37 am #386246
Tan
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Hi Sir, one more question for Q1(iii).
Sir, may I know how to get this figure $71m from the sample answer?
May 15, 2017 at 1:44 pm #386282
Ken Garrett
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Query 1: these costs have been included when working out the new contribution per unit.
Query 2: Question Appendix 1, 2015, operating profit = 71m
May 17, 2017 at 4:51 pm #386690
Tan
Member
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Hi sir, regarding to Query 1, the new contribution per unit of $51.9 is derived from [75 – 21 – (21 x 10%)].
The audit cost and marketing campaigns are not included, right?
May 18, 2017 at 8:49 am #386812
Ken Garrett
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These are incremental fixed costs.
Old cost structure = 75 – 21 = 54 contribution
New cost structure = 75 – 1.1 x21 = 51.9
If volume didn’t change, operating profit would be down 5.5m
Extra units needed to cover that loss = 5.5/5199 = 105,973
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