CMA Study Group

query regarding Cma -part-1 section B4

  • 1.  query regarding Cma -part-1 section B4

    Posted 28 days ago

    Hello

    Kindly help me with the query.

     

    Carson Products sells sweatshirts and is preparing for a World Cup soccer match. The cost per sweatshirt varies with the quantity purchased as follows:


    Carson must purchase the shirts one month before the game and has analyzed the market and estimated sales levels as follows.


    The estimated selling price is $25 for sales made before and at the game day. Any shirts remaining after game day can be sold at wholesale to a local discount store for $10.

    The expected profit if Carson purchased 6,000 shirts is:

     

     

    Sent from Mail for Windows 10

     



  • 2.  RE: query regarding Cma -part-1 section B4

    Posted 26 days ago
    First calculate the cost price or the purchase price (6000 * 13.5) $81,000. Unsold shirts 3,900 (6000*.65)
    The projected sales revenue for 6000 shirts (6000*35%* $25) $52,500 plus   $39,000 (6000*.65) $10 discounted sales
    The net profit
    Sales                                        $91,500
    beginning inventory  $0
    Less inventory purchases        $ 81000
    Expected profit                         $ 10,500

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    Deon Denton
    Accountant
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  • 3.  RE: query regarding Cma -part-1 section B4

    Posted 24 days ago
    ​the profit must be 13500 not 10500 because you mistakenly multiplied the purchases by 13.5 instead of 13

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    Hebah Masoud
    Supervisor
    Amman
    Jordan
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  • 4.  RE: query regarding Cma -part-1 section B4

    Posted 24 days ago
    Hello Shivaniya,

    Hope you are doing great with CMA

    This is a probability case which can be demonstrated as deon and Hebah have mentioned bellow.

    To explain the answer: Expected profit = (Estimated sales x probabilities) - Estimated cost
    Taking in consideration that: If sales made before and at the game day >>> Probability = 35% with $25 selling price
                                                        Any sales made after the game day >>> Probability = 65% with $10 selling price
                                                                          = (6,000 x 35% x $25) + (6,000 x $65% x $10) - (6,000 x $13.00)
                                                                          = $52,500 + $39,000 - $78,000
                                                                          = $13,500

    Thanks to Deon & Hebah
    Kind regards

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    Samer Ahmad, FMVA, SCA
    Kuwait
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