June 2015,Q1

(ii) . Old contribution/unit = 75 - 21 = 54 New contribution/unit = 75 - 21 x 1.1 = 51.9 (iv) The key is the phrase "using 2015 figures as a base, do sales with the new factory will be the same as with the old. You are told in the question to assume that the operating profit from the new factory is $103m before interest and tax. However, that is not the operating profit of the whole company: it is just from the new factory. Existing shoes manufacturing creates a contribution of (75 - 21)x 2m = 108,000,000. This then becomes 103,000,000 a fall of 5m and this is used to reduce the company's operating profit from 71 to 66