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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
-Media (R's 000): 152,130
-Consumer promotions (R's 000): 134,520
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
-Media: 45,000 62,000
-Consumer promotion: 24,000 27,500
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
-Media: 95,000 112,000
-Consumer promotion: 62,000 70,500
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.

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.