Question: Company Information: Fashion Designers Ltd manufacture specialist leather products and sell their products to exclusive retail outlets all over the Middle East. The company was established five years ago in Jeddah and is performing well to date. Fashion Designers Ltd have three main product lines; handbags, wallets and suitcases. The following financial information has been provided.
Requirement: Your group has been employed as the management accountants for Fashion Designers Ltd and have been asked to prepare a report to the board of directors outlining the following:
a) Using the information above, calculate the following:
• Which product is performing the best?
• Calculate the overall break-even point in sales value for the company and the break-even point in sales value for each product line.
• If the selling price of handbags is increased to SAR 1,500 per unit, what will be the increase in overall profit.
• What level of sales (value) must the company achieve to make a profit of SAR 200,000.
• Using the original information presented, draw a CVP graph outlining the costs, break-even point and profit and loss area for Fashion Designers Ltd and comment on the overall performance of the company.
b) The company is considering eliminating sales commission and increasing salaries by SAR40,000. Outline the implications of making this decision on the overall break-even point in sales value and the overall profit or loss for the company. Should the company proceed with this decision?
c) The company is considering discontinuing the manufacture of suitcases and have asked you to advise them on this decision. (40% of annual marketing costs relate specifically to this product and SAR2,000 of general expenses is directly attributable to this product).
d) Using the information above, prepare the master budget for handbags only for the quarter ending 30th September 2017.
e) Outline the advantages and disadvantages of traditional budgeting and advise the company on whether they should consider implementing ‘the balanced scorecard' system.
Information related to above question is enclosed below:
Attachment:- manacc-1.rar