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Hi,
I see the operating profit for MS for 2015 is $71m but in appendix 3 it states its operating profit currently is $108m based on 2m units sold. Are we to assume then for 2015, 2m units weren’t sold?
I would of used the expected profit $103m for the new factory without doing any further calculations and not used the $66m as per the solution. I want to see how I can avoid this going forward as its not obvious to me.
Really appreciate your help.
Thanks,
Ed
Hello,
thats what even i thought to use $66m . but any idea of how they arrived at the figure of
capital employed $217 ??? i didnt get the ROCE too,thanks for help
I think that the answers mixes up operating profit and contribution.
Current operating profit (GP less expenses) for all products sold = 71m
In this current contribution from shoes = 108m ie (75 – 21) x 2m
New “contribution” from new factory for shoes = 103m ie 5mless
So profits will fall for the business from 71 to 66m
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