Q.No.2. (Marks 20)

Budgeted information for X Ltd for the following period, analyzed by product, is shown below:

Product A Product B Product C

Selling price per unit $11 $10.5 $8

Variable costs per unit $5.8 $6 $5.2

Attributable fixed costs $275000 $337000 $296000

Sales Units for Product A use your arid no (3966) and multiply by 100, for Product B use your arid no (3966) 1.5 times and multiply by 100 and for product C use your arid no (3966) 0.8 times and multiply by 100,

General fixed costs, which are apportioned to products as a percentage sales are budgeted at $1668000.

Required: (1) Calculate the budgeted profit of X Ltd, and each of its products. (2) Recalculate the budgeted profit of X Ltd. On the assumption that product C is discontinued, with no effect on sales of the other two products. State and justify other assumptions made. (3) Additional advertising, to that included in the budget for product A, is being considered. Calculate the minimum extra sales units required of product A to cover additional advertising expenses of $80,000. Assume that all other existing fixed costs would remain unchanged. (4) Calculate the increase in sales volume of product B that is necessary in order to compensate for the effect on profit a 10% reduction in the selling price of the product. State clearly any assumptions made.