Question:
Write a report to the Board of Hardhat Ltd setting-out the financial effects of the various proposals and make recommendations as to what price Hardhat should charge next year and in the longer run.
Your report and presentation should cover:
(a) the sales price needed to earn the target profit, using the information compiled by the budget committee;
(b) the number of units that would have to be sold at the old price to meet the target profit, and whether this seems feasible;
(c) what the profit would be if the sales price calculated in (a) were adopted, but sales volume only rose by 10%, or at best 20%;
(d) any other factors you think should be taken into account when making decisions about the price to be charged next year, such as any change in risk involved in the cost-volume-profit structure you propose; the link between short- and long-run prices; and the interactions between acquisitions policy, financing decisions and pricing decisions.