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Q14 Complete the table below to examine the budgeted profitability of each sales channel per unit.

(3 marks)

B2B

Online

Retail

Sales (£ per unit)

45

64

75

variable cost (£ per unit)

16

15

14

Direct costs (£ per unit)

18

19

20

Contribution (£ per unit)

Cost of sales (£ per unit)

Gross profit (£ per unit)

Q15 Chain&Gear would like to incorporate the profitability analysis in Q14 above, into monthly reporting, and is considering the following enhancements to the regular management report:

(a) Describe how ‘variance analysis’ could be presented in the profitability report.

(2 marks)

(b) What would be the benefit of variance analysis in the report?

(2 marks)

Q15 Continued

(c) Describe how forecasting information could be presented in the profitability report.

(2 marks)

(d) What would be the benefit of forecasting information in the report?

(2 marks)

May 2020 Page 8

Present Value Table

Annuity Table

Discount Rate

Discount Rate

End of Period

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

No. of Periods

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1

0.990

0.980

0.971

0.962

0.952

0.943

0.935

0.926

0.917

0.909

1

0.990

0.980

0.971

0.962

0.952

0.943

0.935

0.926

0.917

0.909

2

0.980

0.961

0.943

0.925

0.907

0.890

0.873

0.857

0.842

0.826

2

1.970

1.942

1.913

1.886

1.859

1.833

1.808

1.783

1.759

1.736

3

0.971

0.942

0.915

0.889

0.864

0.840

0.816

0.794

0.772

0.751

3

2.941

2.884

2.829

2.775

2.723

2.673

2.624

2.577

2.531

2.487

4

0.961

0.924

0.888

0.855

0.823

0.792

0.763

0.735

0.708

0.683

4

3.902

3.808

3.717

3.630

3.546

3.465

3.387

3.312

3.240

3.170

5

0.951

0.906

0.863

0.822

0.784

0.747

0.713

0.681

0.650

0.621

5

4.853

4.713

4.580

4.452

4.329

4.212

4.100

3.993

3.890

3.791

6

0.942

0.888

0.837

0.790

0.746

0.705

0.666

0.630

0.596

0.564

6

5.795

5.601

5.417

5.242

5.076

4.917

4.767

4.623

4.486

4.355

7

0.933

0.871

0.813

0.760

0.711

0.665

0.623

0.583

0.547

0.513

7

6.728

6.472

6.230

6.002

5.786

5.582

5.389

5.206

5.033

4.868

8

0.923

0.853

0.789

0.731

0.677

0.627

0.582

0.540

0.502

0.467

8

7.652

7.325

7.020

6.733

6.463

6.210

5.971

5.747

5.535

5.335

9

0.914

0.837

0.766

0.703

0.645

0.592

0.544

0.500

0.460

0.424

9

8.566

8.162

7.786

7.435

7.108

6.802

6.515

6.247

5.995

5.759

10

0.905

0.820

0.744

0.676

0.614

0.558

0.508

0.463

0.422

0.386

10

9.471

8.983

8.530

8.111

7.722

7.360

7.024

6.710

6.418

6.145

Discount Rate

Discount Rate

End of Period

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

1

0.901

0.893

0.885

0.877

0.870

0.862

0.855

0.847

0.840

0.833

1

0.901

0.893

0.885

0.877

0.870

0.862

0.855

0.847

0.840

0.833

2

0.812

0.797

0.783

0.769

0.756

0.743

0.731

0.718

0.706

0.694

2

1.713

1.690

1.668

1.647

1.626

1.605

1.585

1.566

1.547

1.528

3

0.731

0.712

0.693

0.675

0.658

0.641

0.624

0.609

0.593

0.579

3

2.444

2.402

2.361

2.322

2.283

2.246

2.210

2.174

2.140

2.106

4

0.659

0.636

0.613

0.592

0.572

0.552

0.534

0.516

0.499

0.482

4

3.102

3.037

2.974

2.914

2.855

2.798

2.743

2.690

2.639

2.589

5

0.593

0.567

0.543

0.519

0.497

0.476

0.456

0.437

0.419

0.402

5

3.696

3.605

3.517

3.433

3.352

3.274

3.199

3.127

3.058

2.991

6

0.535

0.507

0.480

0.456

0.432

0.410

0.390

0.370

0.352

0.335

6

4.231

4.111

3.998

3.889

3.784

3.685

3.589

3.498

3.410

3.326

7

0.482

0.452

0.425

0.400

0.376

0.354

0.333

0.314

0.296

0.279

7

4.712

4.564

4.423

4.288

4.160

4.039

3.922

3.812

3.706

3.605

8

0.434

0.404

0.376

0.351

0.327

0.305

0.285

0.266

0.249

0.233

8

5.146

4.968

4.799

4.639

4.487

4.344

4.207

4.078

3.954

3.837

9

0.391

0.361

0.333

0.308

0.284

0.263

0.243

0.225

0.209

0.194

9

5.537

5.328

5.132

4.946

4.772

4.607

4.451

4.303

4.163

4.031

10

0.352

0.322

0.295

0.270

0.247

0.227

0.208

0.191

0.176

0.162

10

5.889

5.650

5.426

5.216

5.019

4.833

4.659

4.494

4.339

4.192

Discount Rate

Discount Rate

End of Period

21%

22%

23%

24%

25%

26%

27%

28%

29%

30%

21%

22%

23%

24%

25%

26%

27%

28%

29%

30%

1

0.826

0.820

0.813

0.806

0.800

0.794

0.787

0.781

0.775

0.769

1

0.826

0.820

0.813

0.806

0.800

0.794

0.787

0.781

0.775

0.769

2

0.683

0.672

0.661

0.650

0.640

0.630

0.620

0.610

0.601

0.592

2

1.509

1.492

1.474

1.457

1.440

1.424

1.407

1.392

1.376

1.361

3

0.564

0.551

0.537

0.524

0.512

0.500

0.488

0.477

0.466

0.455

3

2.074

2.042

2.011

1.981

1.952

1.923

1.896

1.868

1.842

1.816

4

0.467

0.451

0.437

0.423

0.410

0.397

0.384

0.373

0.361

0.350

4

2.540

2.494

2.448

2.404

2.362

2.320

2.280

2.241

2.203

2.166

5

0.386

0.370

0.355

0.341

0.328

0.315

0.303

0.291

0.280

0.269

5

2.926

2.864

2.803

2.745

2.689

2.635

2.583

2.532

2.483

2.436

6

0.319

0.303

0.289

0.275

0.262

0.250

0.238

0.227

0.217

0.207

6

3.245

3.167

3.092

3.020

2.951

2.885

2.821

2.759

2.700

2.643

7

0.263

0.249

0.235

0.222

0.210

0.198

0.188

0.178

0.168

0.159

7

3.508

3.416

3.327

3.242

3.161

3.083

3.009

2.937

2.868

2.802

8

0.218

0.204

0.191

0.179

0.168

0.157

0.148

0.139

0.130

0.123

8

3.726

3.619

3.518

3.421

3.329

3.241

3.156

3.076

2.999

2.925

9

0.180

0.167

0.155

0.144

0.134

0.125

0.116

0.108

0.101

0.094

9

3.905

3.786

3.673

3.566

3.463

3.366

3.273

3.184

3.100

3.019

10

0.149

0.137

0.126

0.116

0.107

0.099

0.092

0.085

0.078

0.073

10

4.054

3.923

3.799

3.682

3.571

3.465

3.364

3.269

3.178

3.092