Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012
2 The Wilco Foods proposal is more advantageous to Mayfair Ltd than the downsizing plan as the subsidy at the projected volume is €5,140 less than the downsizing plan €15,000 compared to €9,860. The calculations areas follows Revenue to Mayfair
Wilco revenue a €251,500 Less Breakeven sales b 48,000 Revenues
in excess of breakeven sales €203,500 Revenues payable to Mayfair c (€203,500
× 0.04)
€8,140 Plus Rent d 12,000 Total payments to Mayfair Cost to Mayfair Fixed costs
(utilities and equipment maintenance)
30,000
Mayfair’s Wilco Foods proposal subsidy
€9,860
a starters × €5) + (94 sandwiches/salads × €4) + €300] × 250 days b monthly payment
× 12 months) ÷ (1 − 75%) contribution margin c
Revenues in excess of breakeven sales
× 4%
d monthly payment × 12 months
22.18 Question from the Chartered Institute of Management Accountants, Intermediate Share with your friends: 
