Essay Yacca Limited Case Study – Profit Analysis – Finance Assignment Help

Assignment Task :

PART A (45 marks): 

Yacca Limited has prepared the following profit analysis, for the current financial year: 

management are concerned at the increased risk from changes to the level of operating gearing. If the selling price is reduced by $0.25 per unit, the number of units sold is expected to increase by 5%. There is no reason why management cannot reduce the selling price and update machinery and production at the same time. 

Required:a)Calculate the contribution margin per unit, total fixed costs, the breakeven point in units, and total expected profit for all of the possible choices that management can make. Present the results of your calculations in a table. Do not include formulas in your write-up. 

b) Complete the following table, showing expected profit at various sales levels for (i) the current state of operations (no changes) and (ii) the case where machinery and production methods are updated:Sales (units) 0 50,000 100,000 150,000 

c) Based on your results for part (b) produce a profit-volume chart. Show both cases on the same set of axes. 

d)  Based on your results to parts (a), (b) and (c), write a brief recommendation to management advising on the recommended course of action. 

PART B  

Outhouse Limited manufactures and sells garden sheds for $905. At the end of June, the following actual and expected sales numbers were provided: 

Each shed requires 26 square metres of sheet metal at a cost of $24 per square metre, and requires three hours of direct labour to be manufactured. The direct labour cost is $18 per hour. The finished goods ending inventory for each month is required to be 38% of next month’s forecast sales, while the raw materials ending inventory for each month is required to be 60% of the requirements for next month’s budgeted production. Finished goods and raw materials inventories at the end of June are 150 units and 3,100 square metres respectively. 

The business collects 55% of receivables in the month of sale and the remainder in the following month. 55% of the cost of raw materials is paid in the month of purchase and the remainder in the following month. The amount owing for purchases at the beginning of July is $50,000. 

In addition to raw materials and direct labour, the business has the following monthly expenses: Variable selling expenses of 5% of sales; fixed administration expenses of $12,000 including depreciation of $2,000 and wages of $9,500; and factory overheads of $20,000 including depreciation of $5,000. The business pays all cash amounts owing for these expenses in the month incurred. 

Outhouse Limited had a cash at bank balance of $100,000 at the end of June. 

Required:

a) Prepare a sales budget by month for the period June to September.  

b) Prepare a schedule of cash collections by month for the period July to September.  

c) Prepare a production budget by month for the period July to September.  

d) Prepare a direct materials budget for July and August.  

e) Prepare a direct labour budget for July and August.  

f) Prepare the cash budget for July