• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

I can't believe its potatoes.

Extracts from this document...

Introduction

I can't believe its potatoes I can't believe its potatoes (ICBIP) are a crisp manufacturing company established in 1999 and competing with other famous brands such as Tesco value crisp and Before eight crisps. Currently the company offers three products in unique flavor and color: red cinnamon, blue black pepper and yellow ginger. Its currents details are as follows: Products red cinnamon blue- black pepper yellow ginger (All numbers are in �) Existing sales 8000 10000 12000 Selling price 8.00 9.00 9.00 Variable cost Materials 1.10 1.70 2.80 (potatoes@ �0.5 per kg) Labour 2.45 2.55 2.00 (@ �2 per hour) Fixed cost allocation 3.00 3.70 3.75 ------------ ----------- ------------ Total cost 6.55 7.95 8.55 ------------ ------------ ------------Contribution per bag 1.45 1.05 0.45 Expected Sales 7000 6000 8000 Over the years ICBIP have witnessed decline in their sales as their competitors are providing higher customer satisfaction and value for the money. The manager of ICBIP, Ross Beckham is trying to fix the problems associated with red cinnamon and blue black. However manager has alerted the company that yellow ginger is their weakest product as it is making a very substantial profit compared to other products. Consequently Beckham has come up with possible solutions: 1. ...read more.

Middle

(iii)} 8000 = 7903.5715 -------------------- 8000 = 98.794643% Situation might be after the advertisement and promotion Breakeven point Form eq. (ii) 75 + 4.8 x = 7x 75 = 2.2x X = 34.09 Therefore total sales 238.6363 Margin of safety {From eq. (iii)} Percentage margin of safety = 10000 - 238.6363 ------------------------- 10000 = 97.61364% On the basis of the calculation decrease in price will give net gain of �1360, which is a good profit margin. On the other hand, reduction of sales solution displays the decrease in contribution of �6665 which quite high and company may face more losses. Moreover the overall profit of ICIBP from the normal activity without any solutions suggested is �44800. Last solution of spending advertisement the total sales of company will be 238.6363 and before it was 96.428565 but margin of safety is quite high in both the cases. In conclusion it's better to eliminate solution of sale reduction, as company will loose out �6665. It is not advisable to discard yellow ginger, as in usual business practice it is earning the sales of �44800. Furthermore spending on advertisement and promotion doesn't show enough profits for the company and hardly makes any impact. ...read more.

Conclusion

It gets tricky actually because students are required to calculate normally how ICBIP operates by allocating its labour hours and find the profit. There after students have to compare with other solutions to see whether this is appropriate solution or business should carry on the way it is. In advertisement and promotion solution students are required to calculate and compare the breakeven and margin of safety for both before and after invest in advertisement to decide option is the best for manager. For the second part students had to suggest which would be profitable use of limited supply. This part is difficult then the first one, key to this question was to find contribution per kg and then finding the demand. The logic behind the second half is that with limited supply contribution can be maximized through per unit of limitations. The most important when solving the sum is that students have to assume that 1kg of potatoes is required to make one packet of crisp. With this students will not be able to solve the problem. Also after finding out two ways of calculating the use of potatoes a good student would compare his/her answers and comment on it. Managerial Accounting and Finance Module no.: BS2512 Student no.: 0226318 Tutor: Barry Morse Word count: 1601 Date: 1/12/03 1 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Report composed of an interpretation of the ratios for Marks and Spencers and the ...

    The House of Fraser has a lower figure than that of Marks and Spencer in 2001. Their creditors collection period for 2001 is 104.42, compared to a figure of 138.19 for Marks and Spencer in the same year. The creditors collection period for The House of Fraser also follows a downward trend, like that of Marks and Spencer.

  2. History Of Tesco.

    Most of the old and highstreet stores closed and the company concentrated on creating bigger out of town stores. As the stores were bigger, they sold more items, had wider isles and had better lighting; all this while still offering competitive prices on all of its products.

  1. What Really Determine the Payment Methodsin M&A Deals.

    They conclude that the fact of the substantially higher returns to target shareholders when financed by cash offer indicates that acquirers need to pay the additional tax burden for the targets under such a circumstance. In this respect, a share exchange financing will defer the tax consequences until the share is eventually sold.

  2. Financial accounting

    Mar 29 Drawings 1000.00 Mar 31 Balance c/d 916.53 3373.00 3373.00 Apr 01 Balance b/d 916.53 Bank A/C � � Mar 01 Capital 48000.00 Mar 01 Rent 600.00 Mar 25 J Hoy 411.25 Mar 02 Equipment 10500.00 Mar 02 Vehicle 4750.00 Mar 03 Business rates 800.00 Mar 05 Electricity 269.00

  1. Business unit 2

    As there will be a lot of students wanting to play we need to decide where the goals will be set up and the teams. This will be done on the day of the match as we can tell how many players aside there we will.

  2. As a student at Challney High School for Boys, my task is to decide ...

    20 people who jointly own a business and work in it together. There is a contract drawn up by the partners stating the profits and losses are shared equally amongst the partners as stated in the Partnership Act 1980. The act also states all partners have an equal say in

  1. Tescos HR policys

    'On the job' training means that the employees acquire their training or development in the workplace itself. An example of this in Tesco is when they recruit a school leaver who has little work experience. One of the supervisors will show the new recruit what they have to carry out and may show them how this is done.

  2. Applied Business. Investigating a business Preston Manor High School

    community and the environment, they focus on having a healthy environment not only in school, but in the whole borough and this will make their reputation better. Healthy food such as, salads, pasta, vegetables and juice drinks have been introduced in the canteen.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work