QUESTION $2$A

Requirements

You work for Galaxy Holdings Plc as a Junior Management Accountant.

The board of directors are considering ways to improve the suboptimal performance of an

investment in a manufacturing company called Mars products Ltd$.$

As you can see from the table below the directors are considering closing products Bozon

and Carbon in an effort to improve overall profitability.

You spot that marginal costing would show the results differently and may affect the

directors$$ decision.

Axor Bozon Carbon Total

$($m$)($m$)($m$)($m$)$

Sales $7,9205,2803,78016,980$

Cost of sales

Materials $(2,520)(1,680)(1,680)(5,880)$

Labour $(2,520)(2,520)(2,520)(7,560)$

Fixed Overheads $(1,260)(1,260)(1,260)(3,780)$

Profit$/($loss$)1,620(180)(1,680)(240)$

Requirements for Question $2$ part $($a$)$

$2\mathrm{.}1\mathrm{.}1.$ Produce a Marginal Costing Income Statement analysed by product, also clearly

showing the total profit.

$(4$ marks$)$

$2\mathrm{.}1\mathrm{.}2.$ Use your findings from $2\mathrm{.}1\mathrm{.}1,$ some practical$/$ qualitative considerations and

appropriate academic references to explain whether the company should stop

making product Bozon. Prepare adjusted Marginal Cost Statement showing the

results if Galaxy Holdings Directors stops making Bozon. $(4$ marks$)$

$($two marks for considerations and two marks for an adjusted marginal Costing

Income Statement$)$

$2\mathrm{.}1\mathrm{.}3.$ Use your findings from $2\mathrm{.}1\mathrm{.}1,$ some practical$/$ qualitative considerations and

appropriate academic references to explain whether the company should stop

making product Carbon. Prepare an adjusted Marginal Costing Statement showing

the results if Galaxy Holdings Directors stop making Carbon. $(4$ marks$)$

$($two marks for considerations and two marks for an adjusted marginal Costing

Income Statement$)$

$2\mathrm{.}1\mathrm{.}4.$ What practical actions can Galaxy Holdings take to improve profitability of products

Bozon and Carbon?

$(3$ marks$)$