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It is now 15 February 2024. The new production facility and machinery are set to be ready for use on 1 April 2024. With the development of the facility on track, the SMT is focusing its attention on other matters related to the PB-V range. You receive the following email from Akida Agu, Finance Manager: From: Akida Agu, Finance Manager To: Finance Officer Subject: What-if analysis I've been working closely with the SMT on the budgets for the PB-V range. The SMT has already approved my budget for the PB-V protein powders. However, the SMT would like a further analysis of the PB-V protein bar budget. I've created a PB-V protein bar range budget based on a proposed selling price of C$21 per box of bars. The SMT has asked to see the impact of reducing this selling price by 5% and by 10%. I have prepared a what-if analysis (Exhibit 1) that shows how the price changes would impact sales volumes and fixed costs. I have a meeting coming up with the SMT. I'm in a rush today, so could you assist me by writing a briefing note which explains: • The impacts of the changes to the selling price on budgeted revenues, contributions and profits for PB and the factors we should consider before either of the changes are implemented. (sub-task (a)) Akida Agu Finance Manager

It is now 15 February 2024. The new production facility and machinery are set to be ready for use on 1 April 2024. With the development of the facility on track, the SMT is focusing its attention on other matters related to the PB-V range. You receive the following email from Akida Agu, Finance Manager: From: Akida Agu, Finance Manager To: Finance Officer Subject: What-if analysis I've been working closely with the SMT on the budgets for the PB-V range. The SMT has already approved my budget for the PB-V protein powders. However, the SMT would like a further analysis of the PB-V protein bar budget. I've created a PB-V protein bar range budget based on a proposed selling price of C$21 per box of bars. The SMT has asked to see the impact of reducing this selling price by 5% and by 10%. I have prepared a what-if analysis (Exhibit 1) that shows how the price changes would impact sales volumes and fixed costs. I have a meeting coming up with the SMT. I'm in a rush today, so could you assist me by writing a briefing note which explains: • The impacts of the changes to the selling price on budgeted revenues, contributions and profits for PB and the factors we should consider before either of the changes are implemented. (sub-task (a)) Akida Agu Finance Manager

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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It is now 15 February 2024. The new production facility and machinery are set to be ready for use on 1 April 2024. With the development of the facility on track, the SMT is focusing its attention on other matters related to the PB-V range. You receive the following email from Akida Agu, Finance Manager: From: Akida Agu, Finance Manager To: Finance Officer Subject: What-if analysis I've been working closely with the SMT on the budgets for the PB-V range. The SMT has already approved my budget for the PB-V protein powders. However, the SMT would like a further analysis of the PB-V protein bar budget. I've created a PB-V protein bar range budget based on a proposed selling price of C$21 per box of bars. The SMT has asked to see the impact of reducing this selling price by 5% and by 10%. I have prepared a what-if analysis (Exhibit 1) that shows how the price changes would impact sales volumes and fixed costs. I have a meeting coming up with the SMT. I'm in a rush today, so could you assist me by writing a briefing note which explains: • The impacts of the changes to the selling price on budgeted revenues, contributions and profits for PB and the factors we should consider before either of the changes are implemented. (sub-task (a)) Akida Agu Finance Manager Exhibit 1 - What-if analysis: Impact of decreases in selling prices on the PB-V protein bar range budget for 1 Apr to 30 Jun 2024 Sales revenue Variable cost* Contribution Fixed cost Profit Original Budget C$000 913 (481) 432 (100) 332 Reduce selling price by 5% Revised budget C$000 998 (553) 445 (100) 345 Impact +9.3% +15.0% +3.0% +0.0% +3.9% Reduce selling price by 10% Revised budget C$000 995 (582) 413 (115) 298 Impact +9.0% +21.0% -4.4% +15.0% -10.2% *Note - This analysis was prepared under the assumption that the variable cost per unit will not change when the selling price change s. 5
Transcribed Image Text:It is now 15 February 2024. The new production facility and machinery are set to be ready for use on 1 April 2024. With the development of the facility on track, the SMT is focusing its attention on other matters related to the PB-V range. You receive the following email from Akida Agu, Finance Manager: From: Akida Agu, Finance Manager To: Finance Officer Subject: What-if analysis I've been working closely with the SMT on the budgets for the PB-V range. The SMT has already approved my budget for the PB-V protein powders. However, the SMT would like a further analysis of the PB-V protein bar budget. I've created a PB-V protein bar range budget based on a proposed selling price of C$21 per box of bars. The SMT has asked to see the impact of reducing this selling price by 5% and by 10%. I have prepared a what-if analysis (Exhibit 1) that shows how the price changes would impact sales volumes and fixed costs. I have a meeting coming up with the SMT. I'm in a rush today, so could you assist me by writing a briefing note which explains: • The impacts of the changes to the selling price on budgeted revenues, contributions and profits for PB and the factors we should consider before either of the changes are implemented. (sub-task (a)) Akida Agu Finance Manager Exhibit 1 - What-if analysis: Impact of decreases in selling prices on the PB-V protein bar range budget for 1 Apr to 30 Jun 2024 Sales revenue Variable cost* Contribution Fixed cost Profit Original Budget C$000 913 (481) 432 (100) 332 Reduce selling price by 5% Revised budget C$000 998 (553) 445 (100) 345 Impact +9.3% +15.0% +3.0% +0.0% +3.9% Reduce selling price by 10% Revised budget C$000 995 (582) 413 (115) 298 Impact +9.0% +21.0% -4.4% +15.0% -10.2% *Note - This analysis was prepared under the assumption that the variable cost per unit will not change when the selling price change s. 5
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