Task 1
(a) Kitchenware Products have asked you to develop a financial planning model so that they can determine how net profits would be affected by changes in planned sales volume and product price over years 2 to 4.
(b) Having built the financial planning model, Kitchenware Products now want to look at three ‘what-if’ scenarios.
• Scenario 1: Suppose inflation is predicted to be 6% during the second year and 8% thereafter. What would be the profitability of the new carving knife in these circumstances?
• Scenario 2: Suppose the Company decides to sell 3% more units per year as well as increasing the current selling price by 10% per year. What would be the effect on the ‘net profit after tax’ for each year?
• Scenario 3: Suppose that Kitchenware Products decides to vary the projected sales volume over a range from -5% to 10% of the initial assumption. The company wants to see how the ‘Net profit after tax’ would change as the projected sales volume changes.
Kitchenware Products has decided to make a major capital investment in the introduction of a new product, the Wahl James Martin Electric Knife or as it is called in the Company as: Proto C. The Wahl James Martin Electric Knife (Proto C) with its soft touch grip handle is designed for easy and comfortable use. There is a double action safety lock to prevent the knife being accidently operated and a safety button for the safe removal of the blades. Two sets of stainless steel blades, a set of standard blades and a set of coarse blades allowing you to cut a variety of foods, expertly carving the roast dinner, neatly cutting bread and can even cut through frozen food. This item is great for when carving a Sunday roast, Christmas or family gatherings, no need to struggle anymore with uneven slices with this electric knife it makes cutting like a dream!
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