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Using the information in Table MA.4, advise the marketing director on whether it

would be more beneficial to make fruit and nut bars rather than buy them in from

another company for 1.70 per bar. What other considerations need to be taken into

account?

Table MA.1 Volume chocolate bars	Selling price per bar	Cocoa grams per bar	Sugar grams per bar	Milk millilitres per bar
Dark	80,000	2.00	170	30	0
Milk	140,000	1.80	130	40	30
White	60,000	2.00	0	70	130
Raw material costs	4 per kg	2 per kg	1 per litre

Table MA.2 Indirect costs*	k
Rent	18.2
Utilities	13.8
Factory administration	12.7
Marketing and sales	47.4
Administrative salaries	38.5

factory indirect costs are currently allocated on a blanket rate.

Packaging is estimated at 200 per 1,000 bars.

Direct labour costs are expected to be 10 per hour.

Table MA.3 Sales directors volume and price assumptions
Increase price	Decrease volume
Dark chocolate bars	10%	10%
Milk chocolate bars	5%	5%
White chocolate bars	No change	No change

Table MA.4 Fruit and nut: raw material costs
Per bar	Quantity	Cost
Cocoa, sugar, and milk	Assume 50% of milk bar
Fruit	50g per bar	4 per kg
Nut	50g per bar	8 per kg
Direct labour, packaging, and factory overhead	Cost per bar: use same assumptions as other chocolate bars

Sales revenue budget
	Dark	milk	white	total
Volume	80000	140000	60000	280000
selling price per bar	2	1,8	2
total sales revenue	160000	252000	120000	532000
Raw materials
	dark	milk	white	total
volume	80000	140000	60000	280000
cocoa per bar	0,17	0,13	0	0,3
total cocoa used	13600	18200	0	31800
cost per kg	4	4	4	4
total cocoa cost	54400	72800	0	127200
volume	80000	140000	60000	280000
sugar per bar	0,03	0,04	0,07	0,14
total sugar used	2400	5600	4200	12200
cost per kg	2	2	2	2
total sugar cost	4800	11200	8400	24400
volume	80000	140000	60000	280000
milk per bar	0	0,03	0,13	0,16
total milk used	0	4200	7800	12000
cost per kg	1	1	1	1
total milk cost	0	4200	7800	12000
Packaging
	dark	milk	white	total
volume per thousand	80	140	60	280
cost	200	200	200	200
total packaging cost	16000	28000	12000	56000
Direct labour
	dark	milk	white	total
volume	80000	140000	60000	280000
hours (volume/20)	4000	7000	3000	14000
per hour cost	10	10	10	10
total direct labourcost	40000	70000	30000	140000
Income statement
sales revenue		532000
direct materials
cocoa	127200
sugar	24400
milk	12000	163600
direct labour		140000
ackaging		56000
indirect costs
rent	18200
utilities	13800
factry administration	12700
marketing and sales	47400
administrative salaries	38500	130600
Net income		41800
Management can assure themselves about the estimate by considering the market price and market survey.
b)	Analysis
	dark	milk	white	total
volume	80000	140000	60000	280000
weight	0,285714286	0,5	0,214285714
sales revenue	160000	252000	120000	532000
Direct materials:
cocoa	54400	72800	0	127200
sugar	4800	11200	8400	24400
milk	0	4200	7800	12000
packaging	16000	28000	12000	56000
indirect costs	37314,28571	65300	27985,71429	130600
total costs	112514,2857	181500	56185,71429	350200
profit	47485,71429	70500	63814,28571	181800
net profit margin	0,296785714	0,279761905	0,531785714	0,341729323

Current profitability:
	dark	milk	white
sales volume	80000	140000	600002
selling price/unit	2	1,8	2
Raw materials/unit
cocoa 4/1000*170,*130,*0	0,68	0,52	0
sugar 2/1000*30,*40,*70	0,06	0,08	2,8
milk 0,1/1000*30,*130	0	0,03	0,13
R/Mat.Total	0,74	0,63	2,93
direct labour 1/20*10	0,5	0,5	0,5
total direct costs	1,24	1,13	3,43
Contribution/unit	0,76	0,67	-1,43
total contribution sales*contn/unit	60800	93800	-85800
	68800

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