BUSF_A01.qxd

Suggested answers to selected problem questions

20X2

(8,000 ×0.6 ×0.3) +(10,000 ×0.6 ×0.7) +(12,000 ×0.4 ×0.5) +(15,000 ×0.4 ×0.5)

=11,040 (×£200) =£2,208,000

20X3

11,040 ×0.5 (×£200) =£1,104,000

Additional labour

Hours required per pair of Trackers = 3

Hours released per pair of Repros = 4

Additional hours required per pair of Repros = 3 −(4/2) =1, paid at £6 ×150% =£9

Effective loss of contribution per Repro sale

For each unit lost =£100 − 20 =£80

Capital allowances

£ 000

20X0

Cost 1,000

Capital allowance (25%) (250)

20X1

Brought down 750

Capital allowance (25%) (188)

20X2

Brought down 562

Capital allowance (25%) (140)

20X3

Brought down 422

Disposal proceeds 0 *

Capital allowance (balancing allowance) 422

*This assumes that the project is abandoned after three years.

Taxation

20X0 20X1 20X2 20X3

£ 000 £ 000 £ 000 £ 000

Tracker revenue 2,160 2,208 1,104

Materials (756) (773) (386)

Additional labour (97) (99) (50)

Lost Repro revenue (432) (442) (221)

Management 120 (48) (48) (188)

Capital allowances (250) (188) (140) (422)

(130) 639 706 (163)

Tax at 33% (43)* 211 233 (54)

*This assumes that there are sufficient taxable profits elsewhere in the

business to set against the negative figure in 20X0.

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