(d) Parksville markets its products mainly to various Asian countries. The company also sources materials for its products mostly from China. Parksville expects that the prices of the materials it uses will increase due to a shortage of these materials from its main supplier in China. You have been tasked to prepare the master budget (ie. all the budgets) for the coming year 2021. (i) What information, data, assumptions and predictions would you require to prepare the budgets and explain why you need them. (ii) Parksville is trying to set new targets for its coming year and they intend to use a participative budgeting approach to do so. Why might this approach be useful or otherwise for the company?

Answer with short explanation

Greatsounds Ltd. manufactures and sells Realsound' wireless earphones. The selling price of Realsound is $130.00 per unit. The total annual fixed costs for the year 2020 was $1,989,000. The cost incurred to manufacture the product includes direct materials per unit amounting to $35.00 and direct labour per unit of $29.00. The company also incurs variable manufacturing overhead of $18.80 per unit. The company's variable marketing expenses was $8.20 per unit. The company sold 72,000 units for the year ended 2020. Ignore income tax considerations. Required: (a) How many units must Greatsounds sell in order to breakeven for the year 2020? What is the net profit of Greatsounds for the year 2020? (6 marks) (b) Greatsounds is considering to invest in better manufacturing equipment that would improve efficiency and reduce variable costs. This plan would cause its annual total fixed costs to be $2,530,000 and its total variable cost will be $78 per unit. This would allow the company to reduce its selling price per unit. However, the company wishes to set a selling price that would give it a targeted contribution margin of 35%. The management expects that reducing the selling price would cause an increase in the demand for its product. The company estimates an increase of 5% from the number of units sold in 2020 with the reduction in selling price. What is Greatsounds's new selling price per unit? What is the number of units that Greatsounds would need to sell in order to achieve a net profit equal to the net profit of 2020? Should the company proceed with this plan? Explain your answer. (Show all necessary calculations to support your answer). (6 marks) (c) Refer to the original information (ie. ignore pait (b) data). Compute the margin of safety in percentage % ie. MOS(%) for the year 2020. What is the MOS%) if the number of units sold were 77,000 units, assuming all other information remains the same