The CEO is confused by the different proposals being put forward and he calls on your services as the company's external financial consultant to assist him in drawing up a sensible plan of action.

Question

1. Assuming that the full sales forecast for April can be achieved, assess the impact of the CEO's proposal to drop the entire Tulip brand and advise on its desirability.

2. In view of the shortage of jenesaisquoi, produce an optimal production plan for April and a revised forecast of trading results for April.

3. Following on from requirement 2, assess the viability and effects of the sales director's plans to increase sales of the Lily brand through extra advertising expenditure.

4. What other points of commercial interest would you draw to the CEO's attention?

The data are as follow:

A Dutch manufacturing company which produces a range of three special bottled perfumes under the brand names of Rose, Lily and Tulip. For April, the management accountant has prepared the following forecast of trading results:

The CEO is confused by the different proposals being put forward and he calls on your services as the company's external financial consultant to assist him in drawing up a sensible plan of action.

Question

1. Assuming that the full sales forecast for April can be achieved, assess the impact of the CEO's proposal to drop the entire Tulip brand and advise on its desirability.

2. In view of the shortage of jenesaisquoi, produce an optimal production plan for April and a revised forecast of trading results for April.

3. Following on from requirement 2, assess the viability and effects of the sales director's plans to increase sales of the Lily brand through extra advertising expenditure.

4. What other points of commercial interest would you draw to the CEO's attention?

The data are as follow:

A Dutch manufacturing company which produces a range of three special bottled perfumes under the brand names of Rose, Lily and Tulip. For April, the management accountant has prepared the following forecast of trading results:

She is convinced that sales of the Lily product could be substantially increased beyond the current forecast, although she is unable to quantify the effect. Extra advertising of 80,000 would be required to achieve this increase, together with a 10% reduction in the price of the Rose product. The current forecast of trading results does not include this view. The CEO has reviewed the forecast for April and believes that results can be improved immediately through stopping the manufacture of the Tulip product. Neither the sales director nor the production director agrees with his view but are unsure why they disagree. Fixed overheads are apportioned over the product lines based on space occupied on the factory floor.

The CEO is confused by the different proposals being put forward and he calls on your services as the company's external financial consultant to assist him in drawing up a sensible plan of action.

Sales Variable Costs: Direct Ingredients Direct Labour Variable Overhead Fixed Overhead (apportioned) Net Profit/(Loss) Tulip '000 320 100 30 110 100 340 (20) Lily '000 960 300 80 180 270 830 130 Rose '000 1,000 350 50 200 300 900 100 Total '000 2,280 750 160 490 670 2,070 210 Jenesaisquoi per unit Tulip Lily 1 millilitre 4 millilitres 8 millilitres Rose The sales director confirms that the current unit prices of the products are: 80 Tulip Lily Rose 120 100 Sales Variable Costs: Direct Ingredients Direct Labour Variable Overhead Fixed Overhead (apportioned) Net Profit/(Loss) Tulip '000 320 100 30 110 100 340 (20) Lily '000 960 300 80 180 270 830 130 Rose '000 1,000 350 50 200 300 900 100 Total '000 2,280 750 160 490 670 2,070 210 Jenesaisquoi per unit Tulip Lily 1 millilitre 4 millilitres 8 millilitres Rose The sales director confirms that the current unit prices of the products are: 80 Tulip Lily Rose 120 100