Question 4 Budgeting Profit Analyses Africa Plc has prepared a forecast for the next month for one of its products in Table 1 below The forecast is based on producing and selling 4,000 units The senior management team would like to expand the business and are interested to know the profits that could be made at 6,000 Table 1 Output in units 4,000 Sales revenue 140,000 Variable Costs Materials 22,000 Labour 50,000 Overheads 14,000 Fixed Costs 28,000 Required Prepare a profit analysis using a suitable table layout Your analysis should include both the estimated cost per unit and profit per unit at the two levels of estimated output 9 marks Explain the cost classification which is key to forecasting costs Your answer should include why the classification is important, a definition of the two types of cost within the classification and a minimum of two examples for each type of cost 6 marks Asia Plc manufactures two products, the China and the India The expected sales, opening and closing inventories for each product for the next month are shown in Table 2 below Table 2 China India Sales 3,000 4,500 Opening inventory 500 700 Closing inventory 200 300 Required Prepare the Production Budget for both products 5 marks Total 20 marks

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Question 4 Budgeting/Profit Analyses Africa Plc has prepared a forecast for the next month for one of its products in Table 1 below. The forecast

Question 4 Budgeting/Profit Analyses

Africa Plc has prepared a forecast for the next month for one of its products in Table 1 below. The forecast is based on producing and selling 4,000 units. The senior management team would like to expand the business and are interested to know the profits that could be made at 6,000.

Table 1

Output in units	4,000

Sales revenue	140,000
Variable Costs:
Materials	22,000
Labour	50,000
Overheads	14,000
Fixed Costs	28,000

Required

Prepare a profit analysis using a suitable table layout. Your analysis should include both the estimated cost per unit and profit per unit at the two levels of estimated output.

[9 marks]

Explain the cost classification which is key to forecasting costs. Your answer should include why the classification is important, a definition of the two types of cost within the classification and a minimum of two examples for each type of cost.

[6 marks]

Asia Plc manufactures two products, the China and the India. The expected sales, opening and closing inventories for each product for the next month are shown in Table 2 below:

Table 2