Calculations

Calculate the current sales profit margin percentage pre-exit (before MEXIT).

Roles and grades within the accounting department team (pre-Mexit announcement)
Function
Receivables
Payables
Credit Control
Payroll
Long-term Asset Management
Treasury and Cash Management
Team leader
PQ(A) Lara Petrov
FQ(A) Gerry Otuma
FQ(B) Rafael Sanchez
PQ(B) John Conti
FQ(C) Robert Stone
PQ(C) Philip Russell
Reports
PQ(D) T1 and T2
PQ(E) + T3
FQ(D) + T4 and T5
T6 and T7
No reports
T8
After the MEXIT announcement there are a number of resignations of staff who are CETA
nationals in the accountancy department, due to uncertainty over MEXIT, who all plan to
leave before the point of MEXIT:
Staff:
Fully Qualified (FQ) staff
Part Qualified (PQ) staff
Technician staff
No:
2
2
4
Roles:
FQ (A) and (D)
PQ (B) and (E)
T1, T2, T6 and T8
Further quantitative data on Telford Engineering
• Telford Engineering exports 40% of its output to CETA.
•
Telford Engineering imports 50% of its materials from CETA and import costs will be
affected by the lower exchange rate post MEXIT.
•
Pre-Exit Exchange rate: M$1.00 = C$1.40
•
Post-Exit Exchange rate: M$1.00 = C$1.12
•
Post-exit fall in export volume to CETA based countries = 30%
•
Post exit general increase in departmental staff costs due to staff replacements
(excluding Accounting Dept.) = 10%
•
Increase in salaries of replacement staff in the accountancy department due to
MEXIT announcement = 20%
Assumptions
1. Exit from CETA takes place in one year’s time.
2. The exchange rate between Menai and CETA falls at the point at which MEXIT is
announced but remains constant for the foreseeable future.
3. Exports are invoiced in the domestic country currency (Menai $) so there is no
currency conversion effect on exports.
4. Fall in export volume is a one-off reduction due to MEXIT.
5. Imports from CETA are subject to the increased exchange rate conversion rate post
exit.
6. Material volume will be affected proportionally by changes in sales volume, including
exports.
7. Assume all other costs are fixed in respect of sales volume.
8. The general inflation rate is assumed to be zero each year for all revenue and costs
(including wage inflation for all staff remaining in post, except when being replaced).
9. Assume all amortisation costs and overheads remain constant for the next year and
for the foreseeable future.
10. Ignore time value of money and taxation.
Questions to Answer:
Q 1) Calculate the current sales profit margin percentage pre-exit (before MEXIT). State your
answer to the nearest whole percentage and do not include any symbols, for example, “54”.
Q 2) Calculate the forecast net profit of Telford Engineering post-exit (after MEXIT) assuming
all staff who resign are replaced to the nearest $M,000. For your answer only state the first
two digits and do not include any symbols, for example, “72”.
Q 3)Calculate the forecast post-exit (after MEXIT) accounting department costs as a
percentage of sales on the assumption that all staff who resign, pre-MEXIT, are replaced. State
your answer to the nearest whole percentage and do not include any symbols, for example
“21”.