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Anytime Best Coffee (ABC) manufactures and sells packets of coffee capsules for use in coffee machines through their website. Management is concerned about a projected
Anytime Best Coffee (ABC) manufactures and sells packets of coffee capsules for use in coffee machines through their website. Management is concerned about a projected drop in the number of units sold and wishes to determine the impact of ABCs cost structure on the profits going forward. The following is the previous months (May 2021) operating income statement.
Revenue (17 500 packets sold) |
| $175,000 |
Cost of Goods sold |
|
|
| $90,000 |
|
| 30,000 |
|
Operating costs |
|
|
| 15,000 |
|
| 25,000 |
|
Required
- From the case above, calculate the Contribution margin, Breakeven point, and Margin of safety in both units and dollars and explain how these techniques complement systems for costing, revenue management, cost management, strategy, and management control.
[12 marks]
- If management projects the number of packets sold in June to be 12 500, calculate the projected profit and comment on the results against the techniques applied in a) above.
[4 marks]
- Calculate the number of units to be sold to reach an after-tax profit in June of $1,500. Assume a tax rate of 30%. How do you propose management reach the targeted sales bearing in mind the projected results in b) above? What will the impact be on the margin of safety?
[4 marks]
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