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A) Burning Desires Limited (the Company) produces and sells a wood burning stove called the View Clear. The Company has been producing stoves for
A) Burning Desires Limited (the Company) produces and sells a wood burning stove called the View Clear. The Company has been producing stoves for the British market for over 30 years and began exporting a limited number of stoves to Canada about 10 years ago. The Company is a subsidiary of a Chinese multinational that has not been satisfied with the losses that the Company has incurred over the last few years. The parent company in China is threatening to close the British factory unless the Company can produce a profit in the next year of operation. The factory currently has a capacity to produce 59000 stoves per grear but all realistic estimates of its market size, including the exports to Canada, sugges, that it will not sell more than 30,000 stoves per year in any of the next 5 years. The managing director has hired you to find ways to improve profitability. You analyse the cost structure of the Company and find the following Production costs Variable-GHS 50 pro ed-GHS 2.500.000 for 300 s 3& Selling and administrative expenses Variable-GHS, 150 per stove Fixed-GHS 1,800,000 During the year ended 30 September 2017, the Company sold 28,000 View Clear stoves for GHS 1.400 each. Required: 1. Using the full-costing approach, prepare an income statement to ascertain profit for the period [12 marks] (12 marks] Prepare 2p income statement for the year ended 30 September 2017 showing the total . Explain the difference in net incomes (support your answer with relevant computation) [5 marks] w. Calculate the company's break-even point in units of stove and in sales revenue
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