- This topic has 3 replies, 2 voices, and was last updated 11 months ago by
John Moffat.
John Moffat.-
Posts
-
tomasm
- Topics: 7
- Replies: 2
- ☆
Hi Tutor
Fit Co owns and runs two local sports club. Last year the largest club made sales of $500,000 but as member numbers are declining they are thinking about refurbishing the gym and upgrading the equipment.
The expected costs and benefits of the refurbishment are as follows:
(i) New fitness equipment would cost $450,000 to buy and install. This includes a refurbishment of the gym space.
(ii) Sales are expected to rise to $550,000 in Year 1 if the changes are made, thereafter increasing by 5% per year. If the changes are not made sales are expected to fall by $40,000 per year.This is BPP Q23.7
Task 2 : Calculate incremental sales : Answer is 50000 + 40000 = 90000
I understand 550 -500 but where is 40000 from ?
John Moffat
- Topics: 57
- Replies: 49603
- ☆☆☆☆☆
Last year the sales were $500,000 and if the changes are not made then they will fall by 40,000 and will therefore be $460,000.
If the changes are made then the sales will be $550,000.
Therefore the incremental sales due to making the changes will be 550,000 – 460,000 = $90,000
tomasm
- Topics: 7
- Replies: 2
- ☆
Thank you Sir
Also the question before that Great southerners
TASK 1: H3 – why is it only 60000 from disposal ? Why are we not adding the sales of (50000*12)John Moffat
- Topics: 57
- Replies: 49603
- ☆☆☆☆☆
The revenue from the sales of 50,000 a year is effectively included in calculating the contribution each year in row 4.
tomasm
John Moffat- You must be logged in to reply to this topic.