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    Preparing P&L statements for two different strategies

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    GIVEN:

    Table 1: EXISTING STRATEGY
    Unit Sales: 783,360
    Net Sales: (R's 000) 1,442,940
    Variable Cost of Sales: (R's 000) 808,050
    Total advertising and promotion (A&P)
    -Media (R's 000): 152,130
    -Consumer promotions (R's 000): 134,520
    -Trade promotions (R's 000): 124,120
    Operating profit (R's 000): 154,130

    Table 2: NEW PRODUCT SALES ESTIMATES
    Positioning Strategy #1: Year 1 Year 2
    Retail units: 80,000 150,000

    Positioning Strategy #2: Year 1 Year 2
    Retail units: 270,000 440,000

    Table 3: ASSUMPTIONS
    Positioning Strategy #1: Year 1 Year 2
    Investment in capacity (Rs 000): 50,000 22,000
    Depreciation on Equipment (Rs 000): 5,000 7,200
    Advertising and promotion (Rs 000):
    -Media: 45,000 62,000
    -Consumer promotion: 24,000 27,500
    -Trade promotion: 19,500 21,000
    Variable cost/unit (Rs) 1,330 1,330
    Price/unit to retailers (Rs) 2,350 2,350

    Positioning Strategy #2: Year 1 Year 2
    Investment in capacity (Rs 000): 150,000 52,000
    Depreciation on Equipment (Rs 000): 15,000 20,200
    Advertising and promotion (Rs 000):
    -Media: 95,000 112,000
    -Consumer promotion: 62,000 70,500
    -Trade promotion: 35,500 38,000
    Variable cost/unit (Rs) 1,250 1,250
    Price/unit to retailers (Rs) 2,150 2,150

    1) PROVIDE P/L STATEMENT FOR STRATEGIES 1 & 2 FOR BOTH YEAR 1 & 2
    2) Calculate answers to at least three decimal places except for unit calculations, which should be rounded up to the next unit.
    3) The data in tables is not comprehensive; for example, subtracting variable cost and A&P from net sales (revenue) will not yield an operating profit of Rs. 15,413,000. This is not a mistake; it simply means that there are other fixed costs that are not listed.
    4) Some of the data in the description may not be needed to complete the assignment; for example, depreciation has been calculated in the exercise. A P&L statement does not include the full investment cost of capital assets such as plants and equipment; instead, it includes depreciation, through which the full cost of these assets is reflected in the P&L as the assets are used up over their useful lives.

    ANSWER:
    Using data above, create Year 1 & Year 2 P&L statements for both Strategy #1 & #2
    Include following items:
    a) Unit Volume
    b) Revenue
    c) Variable cost
    d) Variable margin: total and per unit
    e) Fixed costs (detail what should be included here)
    f) Profit.

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    https://brainmass.com/business/capital-structure-and-firm-value/preparing-pl-statements-different-strategies-604402

    Solution Summary

    This solution shows how to prepare P&L statements for a company with two positioning strategies, and how to calculate total and per unit variable margin.

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