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budge t i s sues s plc produces and sells three products x y and z it has contracts 736865

Budge t i s sues .

S plc produces and sells three products, X, Y and Z. It has contracts to supply products X and Y, which will utilise all of the specific materials that are available to make these two products during the next period. The revenue these contracts will generate and the contri bution to sales (c/s) ratios of products X and Y are as follows:

Product X

Product Y

Revenue

C/S ratio

£10 million

15%

£20 million

10%

Product Z has a c/s ratio of 25%.

The total fixed costs of S plc are £5.5 million during the next period and management have budgeted to earn a profit of £1 million.

Required

1 Calculate the revenue that needs to be generated by Product Z for S plc to achieve the budgeted profit.

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