（ii) Comment briefly on how divisional managers might respond to the results achieved and

(ii) Comment briefly on the use of its own tree plantations as a source of raw materials by Our Timbers Ltd.

(3 marks)

Required:

(iii) A firm of consultants has offered to undertake a study on behalf of Envico Ltd which will provide perfect

information regarding seminar attendance during the forthcoming year.

Advise the management of Envico Ltd with regard to the maximum amount that they should pay to

consultants for perfect information regarding seminar attendance and comment briefly on the use of

perfect information in such decisions. (5 marks)

Hair Co manufactures three types of electrical goods for hair: curlers (C), straightening irons (S) and dryers (D.) The budgeted sales prices and volumes for the next year are as follows:

Each product is made using a different mix of the same materials and labour. Product S also uses new revolutionary technology for which the company obtained a ten-year patent two years ago. The budgeted sales volumes for all the products have been calculated by adding 10% to last year’s sales.

The standard cost card for each product is shown below.

Both skilled and unskilled labour costs are variable.

The general fixed overheads are expected to be $640,000 for the next year.

Required:

(a) Calculate the weighted average contribution to sales ratio for Hair Co.

Note: round all workings to 2 decimal places. (6 marks)

(b) Calculate the total break-even sales revenue for the next year for Hair Co.

Note: round all workings to 2 decimal places. (2 marks)

(c) Using the graph paper provided, draw a multi-product profit-volume (PV) chart showing clearly the profit/loss lines assuming:

(i) you are able to sell the products in order of the ones with the highest ranking contribution to sales ratios first; and

(ii) you sell the products in a constant mix.

Note: only one graph is required. (9 marks)

(d) Briefly comment on your findings in (c). (3 marks)

(ii) Briefly discuss THREE disadvantages of using EVA？ in the measurement of financial performance.

(3 marks)

(ii) Briefly discuss FOUR non-financial factors which might influence the above decision. (4 marks)

(ii) Briefly explain the extent to which the application of sensitivity analysis might be useful in deciding

which refrigeration system to purchase and discuss the limitations inherent in its use. (3 marks)

(ii) Briefly discuss TWO factors which could reduce the rate of return earned by the investment as per the

results in part (a). (4 marks)

(ii) Briefly explain the implications of Parr & Co’s audit opinion for your audit opinion on the consolidated

financial statements of Cleeves Co for the year ended 30 September 2006. (3 marks)

(ii) Comment on the figures in the statement prepared in (a)(i) above. (4 marks)

(ii) Briefly outline the tax consequences for Henry if the types of protection identified in (i) were to be

provided for him by Happy Home Ltd compared to providing them for himself. You are not required to

discuss the corporation tax (CT) consequences for Happy Home Ltd. (4 marks)