Answer to Question #309655 in Management for Ethan molla

Question

1. Suppose Mary intends to sell two software products X & Y for the next convention &

budgets the following.

X Y Total

Units Sold. 60 40 100

Revenues, $200 $100 per unit $12,000 $ 4,000 $16,000

Variable Costs, $120 $70 per unit 7,200 2,800 10,000

Unit Contribution Margin, $80 $ 30 per unit $ 4,800 $ 1200 $ 6,000

Fixed Costs 4,500

Operating Income $ 1,500

Required: What is the BEP (in units & in Birr

Required: Answer the following

1. What is the sales mix of videos and equipment sets

2. Compute weighted average contribution margin

3. Compute the break-even quantity of each product.

4. What is weighted average contribution margin ratio

5. What is the overall break-even sales revenue

Answer 1

1 (a) Consolidated statement of fi nancial position of Picant as at 31 March 2010

$’000 $’000

Assets

Non-current assets:

Property, plant and equipment (37,500 + 24,500 + 2,000 – 100) 63,900

Goodwill (16,000 – 3,800 (w (i))) 12,200

Investment in associate (w (ii)) 13,200

––––––––

89,300

Current assets

Inventory (10,000 + 9,000 + 1,800 GIT – 600 URP (w (iii))) 20,200

Trade receivables (6,500 + 1,500 – 3,400 intra-group (w (iii))) 4,600 24,800

––––––– ––––––––

Total assets 114,100

––––––––

Equity and liabilities

Equity attributable to owners of the parent

Equity shares of $1 each 25,000

Share premium 19,800

Retained earnings (w (iv)) 27,500 47,300

––––––– ––––––––

72,300

Non-controlling interest (w (v)) 8,400

––––––––

Total equity 80,700

Non-current liabilities

7% loan notes (14,500 + 2,000) 16,500

Current liabilities

Contingent consideration 2,700

Other current liabilities (8,300 + 7,500 – 1,600 intra-group (w (iii))) 14,200 16,900

––––––– ––––––––

Total equity and liabilities 114,100

––––––––

Workings (fi gures in brackets are in $’000)

(i) Goodwill in Sander

$’000 $’000

Controlling interest

Share exchange (8,000 x 75% x 3/2 x $3·20) 28,800

Contingent consideration 4,200

Non-controlling interest (8,000 x 25% x $4·50) 9,000

–––––––

42,000

Equity shares 8,000

Pre-acquisition reserves:

At 1 April 2009 16,500

Fair value adjustments – factory 2,000

– software (see below) (500) (26,000)

––––––– –––––––

Goodwill arising on acquisition 16,000

–––––––

Goodwill is impaired by $3·8 million and therefore has a carrying amount at 31 March 2010 of $12·2 million. The

goodwill impairment is charged against Sander’s retained earnings (see working (iv)), thus ensuring it is allocated between

the controlling and non-controlling interests in proportion to their share ownership in Sander.

The effect of the software having no recoverable amount is that its write-off in the post-acquisition period should be

treated as a fair value adjustment at the date of acquisition for consolidation purposes. The consequent effect is that this

will increase the post-acquisition profit for consolidation purposes by $500,000.