Thesis

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Report

To: The Board of Directors
From:
Date:
Subject: Draft budget for 2013/14 and alternative strategies
This is with reference to the board meeting held on 10th of October 2012, I have evaluated the draft budget and following four strategies which are under your consideration to enhance profitability of Sarika Ltd. (the Company) to meet its 20% return on capital. * Paul Burns's Proposal (Shut down of Product Z and sale of related machinery for £5k) * Bob Berry's Proposal (Reduction in sale price and variable material cost of Product Z by £1 and increasing its sale demand by 25%) * Ben Kates' Proposal (Overall increase in sales by10% without any other change) * Arthur Mitchell's Proposal ( Reduction in
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* If sales volume remains the same from period to period, marginal costing reports the same profit in each period (given no change in prices or costs). In contrast, using full cost, profits can vary with the volume of production, even when the volume of sales is constant. Using absorption costing there is therefore the possibility of manipulating profit, simply by changing output and stock levels.

A statement of total contribution and profit for the original budget and each of the four aforementioned proposals has been prepared for your consideration which is as follows.

| Original Budget | | Paul Burns's Proposal | | Bob Berry's Proposal | | Ben Kates' Proposal | | Arthur Mitchell's Proposal | | X | Y | Z | Total | | X | Y | Z | Total | | X | Y | Z | Total | | X | Y | Z | Total | | X | Y | Z | Total | Units k | 100 | 80 | 120 | 300 | | 100 | 80 | 0 | 180 | | 100 | 80 | 150 | 330 | | 110 | 88 | 132 | 330 | | 100 | 80 | 120 | 300 | Unit Selling Price £ | 15 | 25 | 10 | | | 15 | 25 | 10 | | | 15 | 25 | 9 | | | 15 | 25 | 10 | | | 15 | 25 | 10 | | | | | | |
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