3:03 .filNote: a number of non-financial “costs”.6 of 7 mtion 4:Wm_BI B2Selling price per unit 300 325 Total variable costs: Contribution margin per unit: S205 S95 S260 S65 Current situation Plan A Sales of B1 (495: 1,000 1,250 Sales of B2 @65: 2.Q40 3210 Total Contribution margin: Sales staffs salaries: S225,000 1aS1_00 $362,500 5159375. Net Contribution margin: S15000 S243425•10% of sales (10% of ((1,[email protected]$300) 4. (3,750 (§$325)] .-30% of the TCM (5133,500,Plan B 4000 S445,000 3335,3Q0″.. MUM• Neither plan meets both criteria. • Plan B meets one objective: higher profit. • Plan A meets the other objective of sales staff being paid more (thus more motivated).• ideally, operational expenses for both products should be ignored in all 3 situations, as they remain the same. Also, FOB per unit should be i• We need proper terms and a reasonable format.• Format: could begin with the unit CM and prepare a complete statement or prepare statements like given in the suggested answer to 18.39.Question 5:a)Initial Cash Outflow: Equipment purchase: $460,000 Installation cost: 129,430 Increase in working capital: 55.000 Proceeds of sale of old equipment (inflow): S9.000.0 (net of tax) Total initial cash outflow: 3905,422.0Annual Operation: Tax savingYear Initial CF Annual contfibution margin Annual fixed cost Increment. profit: Tax expense After tax profit from Depreciation Investment Allows0 .85,450.0 S300,000 S300.000 S300.000 4 S300.000 5 S300,000 6 S300,000 S105.000 S105,000 S105,000 SI05,000 S105,000 S105.000 SI95.000 S195.000 S195.000 SI95.000 S195,000 S207.000 S78.000 S78.000 S78.000 S78.000 S78.000 S82.800 $117.000 S117.000 S117.000 S117.000 S117.000 SI24,200 S65,260.00 S65,260.00 S65.260.00 S19.Annual conMbution margin – (350-290).5000 Proceed of thc mle of thc ncw equipment ($12,000) is included in the incremental profit in Year 6DeprecItalon schedule:Year Depre. Rate Annual Depreciation Tax Depreciation effect I 33.33% S163.150 S65.260.00 33.33%
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