A company manufactures a single product with a capacity of 120000 units per annum. The summarized...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A company manufactures a single product with a capacity of 120000 units per annum. The summarized profitability statement for a year is as under: (Note: Direct Labour changes with production) Particulars Sales: 100 000 units @ Rs.15 per unit Less: Cost of Sales Direct materials Direct labor Production overheads-variable Production overheads-foced Administrative overheads-fixed Selling and distribution overheads -variable Selling and distribution overheads - fixed Total cost of sales Profit Amount Rs. 3,00,000 2,00,000 60,000 3,00,000 1,50,000 90,000 1,50,000 Amount Rs. 15,00,000 12, 50,000 250,000 You are required to evaluate the following options: a) What will be the amount of sales required to earn a target profit of 30% on sales, if the packing is improved at a cost of Re. 1 per unit? b) There is an offer from a large retailer for purchasing 30000 units per annum subject to providing a packing with a different brand name at a cost of Rs.2 per unit. However, in this case there will be no selling and distribution expenses. Also this will not in any way affect the company's existing business. What will be the break-even price for this additional offer? c) If an expenditure of Rs.3.00.000 is made on advertising, the sales would increase from the present level of 100000 units to 120000 units at a price of Rs.18 per unit. Will that expenditure be justified? 3 d) If the selling price is reduced by Rs.2 per unit, there will be 100% capacity utilization. Will the reduction in selling price be justified? A company manufactures a single product with a capacity of 120000 units per annum. The summarized profitability statement for a year is as under: (Note: Direct Labour changes with production) Particulars Sales: 100 000 units @ Rs.15 per unit Less: Cost of Sales Direct materials Direct labor Production overheads-variable Production overheads-foced Administrative overheads-fixed Selling and distribution overheads -variable Selling and distribution overheads - fixed Total cost of sales Profit Amount Rs. 3,00,000 2,00,000 60,000 3,00,000 1,50,000 90,000 1,50,000 Amount Rs. 15,00,000 12, 50,000 250,000 You are required to evaluate the following options: a) What will be the amount of sales required to earn a target profit of 30% on sales, if the packing is improved at a cost of Re. 1 per unit? b) There is an offer from a large retailer for purchasing 30000 units per annum subject to providing a packing with a different brand name at a cost of Rs.2 per unit. However, in this case there will be no selling and distribution expenses. Also this will not in any way affect the company's existing business. What will be the break-even price for this additional offer? c) If an expenditure of Rs.3.00.000 is made on advertising, the sales would increase from the present level of 100000 units to 120000 units at a price of Rs.18 per unit. Will that expenditure be justified? 3 d) If the selling price is reduced by Rs.2 per unit, there will be 100% capacity utilization. Will the reduction in selling price be justified?
Expert Answer:
Answer rating: 100% (QA)
Solution a The amount of Sales required to earn a target profit of 30 on sales if packing is improved at a cost of Rs 1 per unit Target Profit 30 On Sales Amount of Sales required to earn a Target pro... View the full answer
Related Book For
Posted Date:
Students also viewed these general management questions
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-6. On December 12, Irene purchased the building where her store is located. She paid...
-
PT. Sultan Food sells food and variety snacks and cake. The company has one restaurant location and serves catering orders for offices. So far, all dishes are made by themselves using family recipes...
-
Instructions In simplified form, you are going to be producing a script. The script will create 2 tables, load the 2 tables with data and then using PL/SQL it will process those 2 tables and with 2...
-
Horace is an employee of Ace Electric Company. Ace provides all employees with group term life insurance equal to twice their annual salary. How much gross income does Horace have under each of the...
-
A perpetuity pays $50,000 at the end of Year 1 and then grows at a rate of 6 percent per year indefinitely. What is the present value if the rate of interest used to discount the cash flows is 10...
-
A comparative balance sheet for Cirrus Corporation is provided in the Working Papers. The income statement for the current year indicates that net income was \($20,900.00\) and the depreciation...
-
Dove Company manufactures one model of birdbath, which is very popular. Morning Dove sells all units it produces each month. The relevant range is 01,500 units, and monthly production costs for the...
-
Jeeger is a highly perishable Burger. Unfortunately, the texture and color of the burgers are not the same after several hours, so once they are prepared in the morning, they can only be sold on the...
-
Patterson, Inc. has provided detals of Its actual cost data for the month. The Controller has asked you to compute the basic variances and the impact of those variances on unit costs. Use the...
-
The human resources department would likely provide which of the following internal controls for the human resources and payroll cycle? A) recalculation of net pay for every pay B) independent...
-
Describe positive psychology and provide an explanation of how it differs from traditional psychology. Discuss the historical context of positive psychology and explain its relevance to the field of...
-
Which value of grade could stop the while loop? import java.util.Scanner; public class Guess { public static void main(String[] args) { int secret = (int) (Math.random()*60 -1); Scanner keyboard =...
-
Assume there are only 2 countries in the world, Home country and Foreign country. They only produce 2 goods, Cheese and Wine. Given the following information: alc ac Answer the following questions. =...
-
months of operation. Which type of Sales price per unit $30.00 Fixed Expenses $200,000 Variable Expenses per unit $14.00 Units Sold 20,000 1. 2. Delivery $40,000 Calculate the contribution margin per...
-
How do theories of globalization elucidate the complex dynamics of cultural homogenization and differentiation, considering the simultaneous spread of global culture and the persistence of local...
-
How has ITC performed over the years (1910 - 2011)?- according to ITC limited: India First case study
-
Classify each of the following as direct costs or indirect costs of operating the Pediatrics ward for children at the Cleveland Clinic: a. Wi-Fi covering the entire hospital campus b. Net cost of...
-
Engcorp and Flotilla are UK divisions of Griffin plc, a multinational company. Both divisions have a wide range of activities. You are an accountant employed by Griffin plc and the Finance Director...
-
Warren Ltd is to produce a new product in a short-term venture which will utilize some obsolete materials and expected spare capacity. The new product will be advertised in quarter I with production...
-
A new private hospital of 100 beds was opened to receive patients on 2 January though many senior staff members including the supervisor of the laundry department had been in situ for some time...
-
A reservoir at vertex 1 in the diagram below is to supply water to several pumping stations. The edge weights are costs of laying pipe from one station to another. How should the pipe be laid so that...
-
Identify which internal control concept is being violated and explain how this may cause an opportunity for fraud to occur within a business: 1. The supervisor for the purchasing department has not...
-
All of the following are typically included in the cash and cash equivalents account except: a. Cash b. Marketable securities c. Money market funds d. 30-day U.S. Treasury bills
Study smarter with the SolutionInn App