The following data relates to Year 3 of the firm Walker plc which manufactures 3 products

Explain your answer and support it with total cost estimates (explicit plus implicit) for each trip option.
September 8, 2020
defining legal characteristics of your business entity
September 8, 2020

The following data relates to Year 3 of the firm Walker plc which manufactures 3 products

4. The following data relates to Year 3 of the firm Walker plc which manufactures
3 products.
Product A Product B Product C
Selling Price per unit £25 £50 £48
Material Cost per unit £6 £10 £7
Labour Cost per hour £3 £2 £3
Variable Overheads per unit £4 £2 £4
Labour hours per unit 2 3 4
Machine hours per unit 3 4 10
Sales and Production (units) 8,000 5,000 3,500
Annual Fixed Costs in Year 3 are £200,000.
(a) Calculate:
(i) the total machine hours worked in Year 3;
(ii) the unit contribution;
(iii) the total profit for Year 3.
In Year 4 it is estimated that the total machine hours will be reduced by 22% and the
demand for unit sales of each product will decrease by 10%.
In Year 4 annual Fixed Costs will increase by 5%.
(b) You are required to calculate for Year 4:
(i) the quantity of each product to be produced and sold to maximise profits;
(ii) the total profit for Year 4.
(c) Explain the term Equity Gearing.


 

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