Decision-Making 2

In your groups , compute the following , ignoring income taxes

1 . There is a special of 300 units to be sold at DM 40 per unit Compute new net income .you can state your assumptions about what costs are relevant and irrelevant . There is no one right set of assumptions

2 . Now Drosselmeier wants a target net income of 45 ,000 DM . It wants to understand how and if it can achieve it . For each method , compute the 1 number of units it must sell , 2 ) independently , how it might reduce costs - variable and

fixed , 3 ) how are these costs best communicated to production so cost savings can be realized , and 4 ) a different selling price . Then discuss the limitations .do not limit the computations for what you think

3 . Assume capacity and sales can be doubled to 4 ,800 units . Again compute new net income if facilities costing 500 ,000DM are added at 5 year life . This is a straight forward computation

add your . Show your calculations Question 1 Present Profit After special sales

Sales 180 ,000 180 ,000

Special sale (300 X 40 DM ) 12 , 000

Cost of Production

Fixed Cost 60 , 0000 60 ,000

Variable Cost 52 ,000 59 ,800 (52000 7800

Selling and Administrative Expenses

Fixed Cost 30 ,000 30 ,000

Variable Cost 20 ,000 23 ,000 (20000 30000

Net Profit 18 ,000 19 , 2000

Net profit after sales is DM 19200

Production fixed cost and selling and distribution fixed cost are irrelevant here...