Accounting for Managers: Interpreting accounting information for decision-making

SOLUTIONS TO QUESTIONS 437

14.4
See Table A2.29.

14.5
The known information is:

Current year Next year

£ mill £ mill

Sales 586 791 +35%

Cost of sales 486

Gross profit 100 17%

Overheads − 19 22

Operating profit 81 13.8% 119 15%

Table A2.29

Budget
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total
Volume (tonne) 100,000 110,000 105,000 120,000
Selling price (per tonne) 300 300 310 310
Variable costs (per tonne) 120 125 125 130

Budget in £’000
Sales and production 30,000 33,000 32,550 37,200 132,750
Variable costs (raw materials) 12,000 13,750 13,125 15,600 54,475

Contribution 18,000 19,250 19,425 21,600 78,275

Fixed costs:
Salaries and wages 3,000 3,000 3,300 3,300 12,600
Maintenance 1,500 1,500 1,500 1,500 6,000
Rates 400 400 400 400 1,600
Insurance 120 120 120 120 480
Electricity 1,000 1,000 1,000 1,000 4,000
Depreciation 5,400 5,400 5,400 5,400 21,600
Other costs 2,500 1,800 1,800 2,500 8,600

Total fixed costs 13,920 13,220 13,520 14,220 54,880

Operating profit 4,080 6,030 5,905 7,380 23,395

Interest expense 600 600 600 600 2,400

Profit after interest 3,480 5,430 5,305 6,780 20,995

(continued overleaf)