Joe is the new product manager at a chain of take-away food stores. He is planning tointroduce a new type of 'fast food' – a pizza or a curry. He has two product options, butthe business can only afford to buy the equipment and advertising material needed forone of these options. He has undertaken some market research and forecasted themain costs for the two product options. He has asked you to help him complete thefollowing tables.Pizza option50 000 units @ R3Unit cost of R1 eachForecasts for one yearCurry Option40 000 units @ R5Sales RevenueCost of Goods SoldUnit cost of R2 eachGross ProfitAnnual equipment costsAnnual advertising costsOther expensesNet ProfitR13 000R12 000R15 000R20 000R13 000R15 000Questiona) The gross profit and net profit of both product options are:b) Considering the figures obtained from the part a of the question, discuss andjustify which option Joe should choose.

Gross profit is computed by deducting Cost of Goods Sold from Sales. Net profit = Gross profit -…

Joe is the new product manager at a chain of take-away food stores. He is planning to introduce a new type of 'fast food' - a pizza or a curry. He has two product options, but the business can only afford to buy the equipment and advertising material needed for one of these options. He has undertaken some market research and forecasted the main costs for the two product options. He has asked you to help him complete the following tables. Forecasts for one year Pizza option Sales Revenue Curry Option 40 000 units @ R5 50 000 units @ R3 Unit cost of R1 each Cost of Goods Sold Unit cost of R2 each Gross Profit Annual equipment costs Annual advertising costs R15 000 Other expenses R13 000 R12 000 R20 000 R13 000 R15 000 Net Profit Question a) The gross profit and net profit of both product options are: b) Considering the figures obtained from the part a of the question, discuss and justify which option Joe should choose.

Joe is the new product manager at a chain of take-away food stores. He is planning to introduce a new type of 'fast food' - a pizza or a curry. He has two product options, but the business can only afford to buy the equipment and advertising material needed for one of these options. He has undertaken some market research and forecasted the main costs for the two product options. He has asked you to help him complete the following tables. Forecasts for one year Pizza option Sales Revenue Curry Option 40 000 units @ R5 50 000 units @ R3 Unit cost of R1 each Cost of Goods Sold Unit cost of R2 each Gross Profit Annual equipment costs Annual advertising costs R15 000 Other expenses R13 000 R12 000 R20 000 R13 000 R15 000 Net Profit Question a) The gross profit and net profit of both product options are: b) Considering the figures obtained from the part a of the question, discuss and justify which option Joe should choose.

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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