- Question 3 The Lahore Qalandars Ltd Lq Ltd Manufacture Cricket Bats Which They Sell To Wholesalers And Retailers Lq L 1 (139.33 KiB) Viewed 19 times
Question 3 The Lahore Qalandars Ltd (LQ Ltd) manufacture cricket bats which they sell to wholesalers and retailers. LQ Ltd have been approached by a buyer who is seeking to place a large order. The sales manager of LQ Ltd has been given the responsibility of negotiating the deal and advising the company. The sales manager has calculated that 15,000 cricket bats could be made and has suggested a selling price of £28 per bat. The costs have been estimated as follows: Variable Costs per unit: Direct Materials Direct Labour Variable Selling overhead Total Attributable Fixed Costs: Production Administration General overheads are £13,000. Required: a) Calculate the profit or loss for the order. (4 marks) b) Calculate the breakeven number of Cricket Bats, breakeven revenue and the margin of safety (in both units and as a percentage). (4 marks) c) After further discussion with the buyer the sales manager believes that the order size may increase if the price can be reduced. The following information has been provided Price (£ per Cricket Bats) Possible order size (no. of Cricket Bats) 20 22,000 25 20,000 28 15,000 30 13,000 32 10,000 Advise whether the company should reduce the selling price. d) Briefly explain the differences between Financial and Management Accounting. £ 6.50 5.20 3.30 15.00 £ 28,000 24,000 (6 marks) (6 marks) (Total 20 marks) ||