Part A

Western Windsurfing (WWS) manufactures three different surf boards and the following is the companys budget for the forthcoming year:

Budget
Product			Type E		Type F		Type G		Total
Budget sales in units			420		360		140
			000		000		000		000
Sales			336		360		210		906
Direct materials			84		189		112		385
Direct labour			126		117		70		313
Variable overhead			42		36		35		113
Fixed overhead			30		28		16		74
			282		370		233		885
Budget profit (loss)			54		-10		-23		21

Concerned that both Types F and G are budgeted to return a loss management are considering a number of options:

1.Discontinue Types F and G.

2. Discontinue Type G only.

3. Increase Type Gs selling price by 70 per unit with an estimated knock-on reduction in demand for Type E and F of 20% and Type G of 30%.

Required:

Using contribution analysis, evaluate the options under consideration and advise management accordingly.