# CMA Study Group

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## 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:

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• #### 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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