Prepare a profit statement which shows the potential situation if John stops production of the dressing tables and demand for the other products remains the same as that of the past six months. Assume that supplies of mahogany are unlimited. What other issues should John consider before making the decision to stop producing dressing tables?

 

take me through all the steps to get to the answer as well. Thank you very much. 

 

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EXHIBIT 1 Cecil's Profit Statement for the last six months' trading Wardrobes Dressing tables (000) 340 100 63 17 Sales revenue Direct materials Direct labour Variable overheads workshop Apportioned fixed workshop overheads Total manufacturing costs Gross profit (loss) Selling & distribution costs Net profit 60 240 Direct materials Direct labour Variable overheads 100 Fixed overheads Total (000) 200 96 48 16 70 230 (30) 120 40 20 40 220 Chests (000) 300 90 53 15 EXHIBIT 2 Mary's Initial Information Gathering Profit statement: Numbers of each product sold in the period covered by the statement : Wardrobes 200 Dressing tables 160 Chests of drawers 200 68 Selling and distribution costs includes delivery costs to the customer. Amount paid to delivery contractor for last six 19 600 months Average delivery cost per product 35 each 226 74 Total 840 286 164 48 198 696 Dressing tables: Six months ago John made the decision to buy in the mirror section of the dressing tables from a local firm at a cost of 200 each. Mary has found the original estimate of the cost if the company were to continue making the mirror section in house, which was used for comparison with the sub-contract price. This is shown below: 144 80 64