Preparing the following planned values:

a.Contribution and contribution / sales ratio (for each product and in total) and the gross profit (in total only)

a.Preparing reconciliation to explain the difference between the total gross profits established using an absorption costing system (task 2 d.) and a marginal costing system (task 3 a.)

(task 2d answer:

Sales Price : 90.00 35.00 55.00

Sales : 58,500.00 33,250.00 63,250.00

Gross Profit : 36,511.70 7,479.94 44,995.17 88,986.80

Note for task 3 a. & b.:

include descriptive notes to workings, define the terminology used and explain the workings

Catherine Smith, the company sales manager has commented that product 'Sun' (Order 1102) is not performing well and the company profits would increase if this product was removed from the range.

Task 4:

a.Re - calculate the gross profit (and gross profit margin) if product 'Sun' is removed from the production and sales schedule.

Note for task 4:

It has been established that, if product 'Sun' was removed from the catalogue, specific fixed cost savings of 12,800 would be made.

a.Draft a memo to Catherine Smith in reply to his comment (with clear explanatory supporting reasons to a non-accountant).

Note:

the memo should be prepared in a good style and show effective skills in written communication and 'quality of information' aspects