MyCIMA

P1 May 2010 answer to Q4

Posted: Thursday 12 August 2010 by Stephen H
Replies : 2
Keywords: P1

Having looked at question 4 and the suggested solution I have queries on 2 points:
Cold Food Outlet contribution
The contribution in the solution is ($432K). Why was the gross contribution of $1,080K ignored?

Overheads
The overheads in the solution are $70K yet the stated overheads are $80K for the restaurant & $30K for the cold food outlet. Any ideas?

Many thanks 

 

P1

Posted by Zuzana on Monday 30 August 2010 15:07

Hi Stephen,

I hope I've understood the question correctly,as I'm not an expert with P1, that's why I'm re-sitting in September.

Cold Food Outlet Contribution - 'If the restaurant is opened, the consultant expects sales from the existing cold food outlet to initially reduce by 40% in year 1'

This is mentioned at the end of the question, therefore only cold food outlet is reduced by 40% and restaurant contr. is used whole - if that makes sense.

Overheads, there is 3 sorts of overheads which makes the $70K, electricity, advertising and audit - this will increase as a result of opening the restaurant.

I usually read the question 2-3 times to point out this little things! But I must say, I got really confused with this question back in May! Let's hope for better luck or better questions this time round!

Good luck, hope this has helped.

Zuzana 

 

P1 May 2010 answer to Q4

Posted by Stephen H on Monday 30 August 2010 15:58

Hi Zuzana,

I appreciate your response.

I'm also re-sitting in Sept :-). I failed by 2 marks in May.

This question also confused me. Infact I attemped the question again this morning and it still isn't clear. The question asks for the NPV of the restaurant project so the cold food sales has nothing to do with the question, yet as you pointed out cold food sales are reduced by 40%. This should be irrevelant based on the question.

Anyway, good luck in 2 days.

Steve