Question $1$:

Sales Revenue: $$1,000,000$

Direct Materials: $$500,000$

Direct Labour: $$200,000$

Overhead: $$200,000$

Required:

Scenario A $($DONE IN CLASS$)$

Calculate the Gross Profit in $

Calculate the Gross Margins in $\%$

Show how much of each $1$$ of revenue is being allocated to each cost to the profit.

Scenario B $($DONE IN CLASS$)$

Repeat from part $1$ to $3$ with this scenario now: Reduce DM by $10\%$ and DL by $5\%.$

What can you say about the results between Scenario A & B$?$

Scenario C $($HOMEWORK$)$

$6.$ To get the same result as in Scenario B $(+60\%$ profit$)$ through Sales modifications this time, how would you do that?

$7.$ Show your results by repeating your calculations as you did above from $1$ to $3.$

Question $2$

Inventory Turns Example Problem

a$.$ What will be the Inventory Turns Ratio if the annual C of GS is $$24$ million and the average inventory is $$6$ million? $($DONE IN CLASS$)$

b$.$ What would be the reduction in inventory if turns were increased to $12$ times per year? $($DONE IN CLASS$)$

c$.$ c$.$ If the cost of carrying inventory is $25\%$ of the average inventory what will the annual savings be$?($HOMEWORK$)$

Question $3$

ABC Canada Inc. is a $BC$ based company selling their premium Inventory of TV stands throughout the country.

The company just released its projections for their $2024$ Year End based on $100,000$ of TV stands sales as follows:

Sales Revenue

Variable Expenses:

Cost of Goods Sold

Electricity and Heat

Fixed Expenses:

Sales force Salary

Depreciation

Rent Expenses

Utilities

$7,500,000$$

$3,500,000$$

$115,000$$

$375,000$$

$70,000$$

$85,000$$

$15,000$$

Total Operating Income Before Tax $3,340,000$ $

Less Taxes at $35\%1,169,000$$

Net Income

$2_{,}171,000$$${?}_{?}$

The above results are based on ABC Canada Inc's production capacity of $150,000$ units. If their production volume would exceed their capacity, the company needs to expand its facility. As such certain expenses would increase as follows:

Salaries will increase by $20\%,$ Depreciation by $15\%$ and heating$/$electricity by $5\%$ while Rent would increase by $25\%.$

$-$prepare projected income statement for ABC Canada inc for

production iutput of $125000$ units And one for $175000$ units