Toy Plc. makes special toy cars which it sells to retailers for K25, 000 per toy car. Retailers sell the toy cars to consumers for K40, 000 each. Budgeted information for the following year: Production and sales 200, 000 toy cars Fixed overhead K2, 400, 000, 000 Variable costs per toy car K6, 500 Recently, the retailer has started using their buyer power over Toy Plc. demanding a discount off the existing price charged to them. Directors of Toy plc. fear that they may lose business if they do not offer some discount to their customers and have asked for advice from a market research consultancy firm. The consultants have suggested that Toy plc. need to reduce the selling price charged to retailers by a minimum of 10% if they are to retain existing customers. The consultants however, believe that Toy plc. can use some buyer power of their own over the suppliers of materials such that the variable cost per toy car would fall by 5%. Draw the profit/Volume Chart Describe five limiations of Break even analysis
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Toy Plc. makes special toy cars which it sells to retailers for K25, 000 per toy car. Retailers sell the toy cars to consumers for K40, 000 each.
Budgeted information for the following year:
Production and sales 200, 000 toy cars
Fixed
Variable costs per toy car K6, 500
Recently, the retailer has started using their buyer power over Toy Plc. demanding a discount off the existing price charged to them. Directors of Toy plc. fear that they may lose business if they do not offer some discount to their customers and have asked for advice from a
The consultants have suggested that Toy plc. need to reduce the selling price charged to retailers by a minimum of 10% if they are to retain existing customers. The consultants however, believe that Toy plc. can use some buyer power of their own over the suppliers of materials such that the variable cost per toy car would fall by 5%.
Draw the profit/Volume Chart
Describe five limiations of Break even analysis
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