BIM Beverages produces a variety of carbonated soft drinks for the local market. The problem of NCDs and their link to life styles has been identified by management as one of the possible causes for a loss of sales in the past three years, At a strategic planning session management was introduced to new product development and Kaizen costing as methods to improve profitability and utilize some idle capacity due to the automation of the operations and the loss of a major distributer. The management has been reviewing the option of introducing a Juice line utilizing seasonal fruits from the Caribbean to address the new health conscious customer. Management believes that sales revenues from the drinks line will decrease by 10% in the next year as the health conscious trend continues to adversely affect sales. Management still wants to achieve increase profits during the rest year. To this end they are including the budgeted value of the new opportunity to produce these fruit juices for the health conscious customer. The most recent income statement is given below before incorporating the new product. TURN OVER Additional information for existing production. - A major distributer in the OECS filed for bankruptcy which will cause the sales and related variable cost of goods sold to decrease by 20%. The fixed manufacturing overhead will not be affected by this reduction in sales. - Management plans to increase the price of the original product by 5% in 2016. - The direct material is 30% of the sales revenue. There will be a 6% reduction in material cost due to the removal of trade barriers. - Direct labour which is 30% of cost of goods sold will decrease by 10% - The manufacturing overhead is 40% variable and 60% fixed. The new automated system which also provides a 12% decrease in the variable manufacturing overhead cost due to efficiency improvements. - Quality Testing and Assurance is a key cost and due to the additional product will increase by 20%. - Marketing and Interest cost will also increase by 12% and 6% respectively due to the new product line. - The other operating expenses will be reduced as follows: Customer service cost 2.5%, distribution cost 3.5% and Administrative cost4%. The nrnierter information for the new nroduct is as follows: Required a) Prepare the budgeted income statement if the Kaizen costing adjustments are realized for the next year and the new product is launched based on the sales estimates. (25 Marks) BIM Beverages produces a variety of carbonated soft drinks for the local market. The problem of NCDs and their link to life styles has been identified by management as one of the possible causes for a loss of sales in the past three years, At a strategic planning session management was introduced to new product development and Kaizen costing as methods to improve profitability and utilize some idle capacity due to the automation of the operations and the loss of a major distributer. The management has been reviewing the option of introducing a Juice line utilizing seasonal fruits from the Caribbean to address the new health conscious customer. Management believes that sales revenues from the drinks line will decrease by 10% in the next year as the health conscious trend continues to adversely affect sales. Management still wants to achieve increase profits during the rest year. To this end they are including the budgeted value of the new opportunity to produce these fruit juices for the health conscious customer. The most recent income statement is given below before incorporating the new product. TURN OVER Additional information for existing production. - A major distributer in the OECS filed for bankruptcy which will cause the sales and related variable cost of goods sold to decrease by 20%. The fixed manufacturing overhead will not be affected by this reduction in sales. - Management plans to increase the price of the original product by 5% in 2016. - The direct material is 30% of the sales revenue. There will be a 6% reduction in material cost due to the removal of trade barriers. - Direct labour which is 30% of cost of goods sold will decrease by 10% - The manufacturing overhead is 40% variable and 60% fixed. The new automated system which also provides a 12% decrease in the variable manufacturing overhead cost due to efficiency improvements. - Quality Testing and Assurance is a key cost and due to the additional product will increase by 20%. - Marketing and Interest cost will also increase by 12% and 6% respectively due to the new product line. - The other operating expenses will be reduced as follows: Customer service cost 2.5%, distribution cost 3.5% and Administrative cost4%. The nrnierter information for the new nroduct is as follows: Required a) Prepare the budgeted income statement if the Kaizen costing adjustments are realized for the next year and the new product is launched based on the sales estimates. (25 Marks)