60.1K

Verified Solution

Link Copied!

CoursHeroTranscribedText: Apsung Ltd produces and sells the A5 mobile phone with three models in the range, the A510, A520 an the A530. In the UKApsung Ltd sells via its own stores located in all major cities as well as to the electronics superstore CPW World. To encourage CPW World to stock the phones a substantial trade discount has been agreed. In addition, Apsung Ltd sells the phones directly to customers online of which 70% of these sales relate the UK with the remainder sold overseas. The latest income statements for Apsung Ltd are detailed below. A510 A520 A530 Total '000 '000 '000 '000 Sales Revenue 1,737 2,895 1,158 5,?90 Variable Manufacturing Cci) 905 1,222 2,657 Trade Discounts 25 25 25 ?5 5alesforce commission c0515 25 32 72 Total costs 520 955 1279 2,804 Contribution 1,16? 1,940 {121} 2,986 Fixed manufacturing costs185 302 382 869 Sales and marketing costs 232 Administration costs 185 Net Income 982 1,638 (503) 1,?00 Apsung Ltd want to understand the profitability of their products when sold via the different routes to market, particularly as the A530 has a negative contribution and have provided the following informatic relating to sales: . The company's own stores account for 50% of the total sales revenue and these are split between the A510, A520 and A530 in the proportions 3:5:2. . CPW World are a growing source of income and now account for 20% of the total sales revenue. They sell 115,800 of the A530 and sales of the A510 are double this amount. The balance of their sales relate to the A520. . The online UK sales have the same breakdown by product as seen in their own stores. . The balance of sales by product relates to the online overseas customers. Ln addi_tion:r r I .. .I r iii. iv. . Fixed manufacturing costs should be allocated to customers based on sales value of each product. VI. . The price of each type of product is the same for all customers. . Variable costs can be allocated to products in the same percentage per product as shown in the income statement. Trade discounts are only given to CPW World. Sales commission is 1.25% of selling price. Sales and marketing costs as well as administration costs should be allocated to Home Stores, CPWr World, UK online and Overseas online in the proportion 3:2:2:1. 4 (continued) Required: . Prepare a detailed customer profitability analysis for Apsung Ltd by customer group. (14 marks) . Analyse the results provided for Apsung Ltd as well as your own results calculated in part a). Include any advice that you think might be important for Apsung Ltd to consider. (6 marks]

Answer & Explanation Solved by verified expert

See Answer