ACC10707 - Credit Sales - Wages - Prepayments - Receipt of Loan - Business Management Assessment Answer

Assessment Task:

a.Calculate the contribution margin, sales mix and weighted average contribution margin for each product. Also calculate the break-even point in total units and units per product based on the provided 2021 data.                                                                                     
b.Management is concerned about competition for some of its trees, and wants to alter its sales mix of trees. This initiative would increase annual fixed costs by $40 000 and alter the sales mix to 40 percent for 1 year old trees, 30 per cent for 2 years old trees and 30 per cent for 3 years old trees . On the available data, would you recommend the initiative? Show all workings.     

Required
a. If funds can earn 5 per cent, what is the small trucks NPV?
b. If funds earn 7 per cent, what is the small trucks NPV?
c. Advise management on your recommendation regarding purchase of the truck subsequent to your NPV calculations.
d.What advice would you give management if the required payback period was two years? Show calculations for a, b and d.

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