1) Prepare the original budgeted profit and loss account for the year (6 marks).
2) Prepared the revised (and separate) budgeted profit and loss account for each of the
different scenarios outlined by the different members of the family in (1) to (3) above. Calculate the break-even-point in number of bottles for Approach (1) and (2 ) (6 Marks).
Wallece Waters Limized is a company based in Narob, Kenpa. I a a fanily owned busines formed by Kamau Wallace ind then handed down to her som and doughtes it manufacturers a single product - a unique brand of vanila favoured spring watec, prodoced to a special recipe known only to the family isself. The company is now run by the grandchildeen of the foundec, and they are luving wame problems in dealing with the competitive and crowded market for bottled spring wrtes. The management, led by Wairimu Wallace an CEO, are starting to prepare neat year's budget and have ascembled the following data. Their initial impression is that this set of focecast dota will not produce an suteme satisfactory to them or the family thaceholders. Thus, the management team has conved to consider some alteenative approaches that might improve the outcome neat year. The following approathes were dicisised at a management meeting Approach 1 Kimani Walack, the CFO, considers that the compary should look ar re-posioning ins products by moving upmarket and seling at higher peices. He believes that the matiet would accept a 1016 increste in selling price per case. However, maketing ewpendture would have to increase by cazo,000 to cemince the market of the imprevemeet in the product. Fixed manufacturing overheads would have to rise by 150 poo per year as well Kimaw is also condident that this approbch would also lead ts a as poo increase in units sold - from 80,000 to 9s,cos units. Approacha Koigi Wallace, the Operations Directoc, suggest that if the product price is cut by awit, it would iead to an estimated asts increase in seles. it is estimated that this would tho lend to an inctease of a00,000 in annual fixed munulacturing overheod, together with an increase of 120,000 in selling overtheade. 31+24+ Approach 3 Njenga Wallace, the Marketing Directoc, revels that he has received a wequest trom a supermarket chain to supply a0,000 cases per year at a aofl discoum on the nommat yelling price. Existing sales would not be affected, but he estimutes that fined manufacturing that this eatra buriness is added to the cuerent budget. Approach \& Wairmu Wallace has her owa views, considering that the company nedsto carn a minimum peofit of syo0,000 for the year. 5 he wanti to focul on cutting costs and har identified some menures to reduce direct muterials costs by aoth. Her view is if adverting expendture is increased by 6360,000 , then sales wil abo increase by a whe. She estmates that fixed mandacturing overheads would hwe to tive by 625,000 . Alse, she corsiders that administration overheads will need to rice by 617, ,oo 5 he warts to knew the veling prien required to achieve that profit outcome. Wallece Waters Limized is a company based in Narob, Kenpa. I a a fanily owned busines formed by Kamau Wallace ind then handed down to her som and doughtes it manufacturers a single product - a unique brand of vanila favoured spring watec, prodoced to a special recipe known only to the family isself. The company is now run by the grandchildeen of the foundec, and they are luving wame problems in dealing with the competitive and crowded market for bottled spring wrtes. The management, led by Wairimu Wallace an CEO, are starting to prepare neat year's budget and have ascembled the following data. Their initial impression is that this set of focecast dota will not produce an suteme satisfactory to them or the family thaceholders. Thus, the management team has conved to consider some alteenative approaches that might improve the outcome neat year. The following approathes were dicisised at a management meeting Approach 1 Kimani Walack, the CFO, considers that the compary should look ar re-posioning ins products by moving upmarket and seling at higher peices. He believes that the matiet would accept a 1016 increste in selling price per case. However, maketing ewpendture would have to increase by cazo,000 to cemince the market of the imprevemeet in the product. Fixed manufacturing overheads would have to rise by 150 poo per year as well Kimaw is also condident that this approbch would also lead ts a as poo increase in units sold - from 80,000 to 9s,cos units. Approacha Koigi Wallace, the Operations Directoc, suggest that if the product price is cut by awit, it would iead to an estimated asts increase in seles. it is estimated that this would tho lend to an inctease of a00,000 in annual fixed munulacturing overheod, together with an increase of 120,000 in selling overtheade. 31+24+ Approach 3 Njenga Wallace, the Marketing Directoc, revels that he has received a wequest trom a supermarket chain to supply a0,000 cases per year at a aofl discoum on the nommat yelling price. Existing sales would not be affected, but he estimutes that fined manufacturing that this eatra buriness is added to the cuerent budget. Approach \& Wairmu Wallace has her owa views, considering that the company nedsto carn a minimum peofit of syo0,000 for the year. 5 he wanti to focul on cutting costs and har identified some menures to reduce direct muterials costs by aoth. Her view is if adverting expendture is increased by 6360,000 , then sales wil abo increase by a whe. She estmates that fixed mandacturing overheads would hwe to tive by 625,000 . Alse, she corsiders that administration overheads will need to rice by 617, ,oo 5 he warts to knew the veling prien required to achieve that profit outcome
