T$6\mathrm{.}2$ Feedwell Ltd$.$

Feedwell Ltd$.$

Feedwell is a manufacturer of animal feedstuffs specialising in pig feeds. The

company has an annual capacity of $100,000$ tonnes. Its present pricing and cost

structure is as follows:

Annual fixed costs:

Wages and salaries

Lease of equipment

Other fixed costs

Selling price per tonne

Raw material cost per tonne

Delivery costs per tonne

Variable manufacturing costs per tonne

Sales commission per tonne

$420,000$

$200,000$

$600,000$

$175$

$140$

$4$

e$6$

$0\mathrm{.}5$

What is the annual breakeven sales volume in tonnes and the breakeven sales

value?

The company is currently selling $65,000$ tonnes per year, what is the

company's net profit or loss?

What sales volume and value would give a profit of $500,000?$

If the marketing manager were paid $0\mathrm{.}25$ per tonne commission as well as

salary, what would be the breakeven sales?

Refer to the original data. If the sales commission were to be replaced by a

salary increase for the sales staff costing $20,000,$ what would be the annual

breakeven point in tonnes and sales value? Is this a desirable change? What

effect would it have on profit at current sales levels?

Refer again to the original data. A new pig producer has established a farm

close to the mill and requires $8,000$ tonnes of feed annually. However, this

farmer having been approached by one of the sales staff indicated that he has

been offered supplies from another miller for $165$ per tonne and will only

agree to place the order with if Feedwell can match this price. As marketing

manager for the company, what would you advise the sales person to do$?$

Give your reasons.