Hello, I would like to see how you do part \"e\" and \"f\" of this problem below

Question

Hello,

I would like to see how you do part "e" and "f" of this problem below. Thank you very much!

https://www.chegg.com/homework-help/questions-and-answers/owners-katy-eh-manufacturing-small-manufacturer-gas-grills-prepared-preliminary-budget-upc-q9395035.

or

The owners of Katy EH Manufacturing, a small manufacturer of gas grills, have prepared a preliminary budget for the upcoming year and would like to assess the financial impact of several alternative scenarios, including dropping a product; changing the price on a product, with a resulting increase in volume; and shifting advertising focus, with a resulting shift in volume from one product to another. A new budget must be prepared. At year-end, the actual results are better than had been planned, but not necessarily better than what should have been, given actual sales volumes.

Hint Consider using the topic of contribution analysis as an easy way to analyze profit-planning issues such as adding or dropping a product or service; changing a price; adding or decreasing expected volumes; or preparing a profit budget. In this particular situation, there are three products, each with different proportions of variable and fixed costs. Make sure you can identify variable and fix costs. Pay attention to the relation of profit and contribution margin. In addition, you also need to consider non-financial factors prior to make your decision.

Required :

a) Should Katy EH drop Grill A? The owners wanted to know the impact of dropping Grill A from their line of products. Sharp was told to assume that the volumes and selling prices of the other two products would be the same whether or not the Grill A product line was dropped.

b) Should Katy EH lower the price of Grill C? The owners wanted to know the impact if they lowered the price of Grill C to $75 and if doing so led to a 20,000-unit increase in sales of Grill C .

c) Should Katy EH change its advertising focus? The owners wanted to know the impact of a 10,000-unit increase in Grill C volume and a related 10,000-unit decrease in Grill A volume because of a shift in advertising emphasis.

d) Should Katy EH lower the price of Grill C and change its advertising focus? The owners wanted to know the impact of lowering the price of Grill C to $75 and shifting the advertising focus more to Grill C, thereby decreasing Grill A volume by 10,000 units and increasing Grill C volume by 30,000 units .

e) Prepare a revised 2016 profit budget assuming the owners chose Option 2 – lowering the price of Grill C to $75 and expecting sales volume of that grill to increase to 220,000 units.

f) The actual results for 2016 are shown in Exhibits3-4. Was 2016 net income more or less than what should have been expected given these actual volumes and prices? If the results were different, why .

Thanks!!

Thoa,

thoa.tran99@yahoo.com.vn

Order #:WEYPWBPH

Explanation / Answer

f)The 2016 net income more than what should have been expected given these actual volumes and prices because the actual volumes of the A 115,000 was higher than expected of 80,000 and the actual volumes of the C 225,000 was higher than expected of 200,000 these has created higher sales and the higher contribution margin of A has push the NetIncome upwards. the actual volumes of the B 110,000 was higher than expected of 120,000. Net sales increased to 115,000*150+110,000 *110+225,000 *75=46225000 by 46225000-41,200,000=5025000.Thus the difference in volumes and Sales prices has made the differences in the income.

revised Operating Budget 2016: Draft 12/18/2015 Sales      4,17,00,000 (=41,200,000-80*200,000+75*220,000) Less: cost of products sold 2,34,00,000 (22800000+30*20,000) Gross margin      1,83,00,000 SG&A 93,50,000 Other costs 21,00,000 Operating income          68,50,000 Less: Interest expense 4,20,000 Plus: Interest income 1,50,000 Income before tax 65,80,000 Income taxes 23,03,000 Income tax=(2,338,000/6,680,000)*65,80,000 Net income $      42,77,000

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