pgbm01 - mba financial management and control (2015-16 trm1 a)pgbm 01 workshop 8 additional question...
TRANSCRIPT
PGBM01 Financial Management & Control
Workshop 8 Additional Question
By
Andy Turton.
Additional Question
Alpha Beta Gamma
£,000 £,000 £,000
Variable Costs:
Materials (6) (4) (5)
Labour (9) (6) (12)
Expenses (3) (2) (2)
Total Variable Cost (18) (12) (19)
Sales Revenue 39 29 33
Contribution 21 17 14
Contribution per £ of labour 2.333 2.833 1.167
Order of profitability 2nd 1st 3rd
Additional Question (Cont.)
Since 50% of each budget ( therefore £13,500 of labour) is committed, only the remaining balance of £6,500 (£20,000 - £13,500) of labour is left uncommitted. This £6,500 should be utilised as follows:
£
Beta 3,000
Alpha 3,500
Total 6,500
Additional Question (Cont.)
Total Labour committed to each service and resultant profit as follows:
Alpha Beta Gamma Total
£ £ £ £
Labour
50% of Budget 4,500 3,000 6,000
Allocated Previously 3,500 3,000
Total 8,000 6,000 6,000 20,000
Contribution per £ of labour 2.333 2.833 1.167
Contribution per unit of
Service 18,664 16,998 7,002 42,664
Less Fixed Costs 33,000
Maximum Profit (after rounding) 9,664
Additional Question (Cont.) (b)
• Analyse the viability of selling more than £29,000 of the Beta service as this service generates the greatest amount of contribution.
• Drop the 50% budgeted commitment to each service.
• Sub-contract the labour intensive part of the work.
Any Questions??