Question- Fudge itd operates at three factory sites producing a closely related product range. The 20x4 budget for fudge Ita's operations is as follows: Croydon Luton Southen E000 1,000 Costs: E000 E000 Variable 475 2,200 1,300 Fixed (site) Fixed (central) 375 650 50 200 100 Sales 1,000 4,000 2,000 Profit 300 250 100 The lease of the Croydon site expires at the end of 20x4. Four alternative options have been identified for the 20XS operations: > Renew the Croydon site lease at an additional annual rental of E50,000, > Shut the Croydon site and franchise Croydon production to another manufacturer at a 1.5 per cent commission on sales. > Shut the croydon site and switch production to lutan; this would involve and additional E250,000 per year fixed costs at luton and additional transport costs on production transferred amounting to 7.5 per cent of sales. > Shut down the Croydon site and switch production to southend; this would involve additional fixed costs of c200,000 per year at southend and additional transport costs on production transferred amounting to 10 per cent of sales. Reguirements Evaluate the options and advise: Which option is most attractive on purely financial grounds;

Question- Fudge itd operates at three factory sites producing a closely related product range. The 20x4 budget for fudge Ita's operations is as follows: Croydon Luton Southen E000 1,000 Costs: E000 E000 Variable 475 2,200 1,300 Fixed (site) Fixed (central) 375 650 50 200 100 Sales 1,000 4,000 2,000 Profit 300 250 100 The lease of the Croydon site expires at the end of 20x4. Four alternative options have been identified for the 20XS operations: > Renew the Croydon site lease at an additional annual rental of E50,000, > Shut the Croydon site and franchise Croydon production to another manufacturer at a 1.5 per cent commission on sales. > Shut the croydon site and switch production to lutan; this would involve and additional E250,000 per year fixed costs at luton and additional transport costs on production transferred amounting to 7.5 per cent of sales. > Shut down the Croydon site and switch production to southend; this would involve additional fixed costs of c200,000 per year at southend and additional transport costs on production transferred amounting to 10 per cent of sales. Reguirements Evaluate the options and advise: Which option is most attractive on purely financial grounds;

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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