Coleman Ltd is a merchandising firm that is the sole distributor of three products that are increasing in popularity among Irish consumers. The company's profit statements for the three most recent months follow: July 4,000 400,000 240,000 160,000 August 4,500 450,000 270,000 180,000 September 5,000 500,000 300,000 200,000 Sales in Units Sales Revenue Less: Cost of Goods Sold Gross Margin Less Operating Expenses Advertising Shipping Salaries Insurance Depreciation Total Operating Expenses Net Income 21,000 34,000 78,000 6,000 15,000 154,000 6,000 21,000 36,000 84,000 6,000 15,000 162,000 18,000 21,000 38,000 90,000 6,000 15,000 170,000 30,000 Coleman Ltd's three products have the following details: Product A 8kg 35 4.37 Product B 5kg 25 5 Product C 6kg 48 8 Direct material (5 per kg) Contribution per unit Contribution per kg of material Demand * Excluding special contracts 3,000 5,000 2,000 The company must produce 1,000 units of Product A for a special contract before meeting normal demand. REQUIRED: a) Identify each of Coleman Ltd's expenses as being variable, fixed or mixed in relation to changes in the level of activity. (10 Marks) b) Utilising the high-low method, separate each mixed expense into variable and fixed elements and determine the cost formula for each mixed expense. (15 Marks) Page 2 of 6 c) Determine Coleman Ltd's optimal production plan for 2020, assuming that one of their objectives is to maximise profits and that their maximum internal capacity in 2020 will be limited to 35,000 kg of material. State clearly any assumptions that you make. (15 Marks) d) Provide three examples of decisions that require knowledge of how costs and revenues vary with different levels of activity. (10 marks) (TOTAL:50 MARKS) QUESTION TWO - ANSWER ALL PARTS