Sales 500000 Direct Materials 250000 Direct Labour 100000 Variable Overheads

Sales 500000 direct materials 250000 direct labour

This preview shows page 190 - 195 out of 203 pages.

Sales 500000 Direct Materials 250000 Direct Labour 100000 Variable Overheads 40000 Capital employed 400000 Existing Proposed Credit Policy 1 month 2 month 3 month Increased sales - 15 percent 30 percent percent of Bad debts 1 percent 3 percent 5 percent 190
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PROBLEMS FOR EXERCISE There will be increase in Fixed cost by Rs. 50000 on account of increase of sales beyond 25 percent of present level. The company plans on pre-tax return of 20 percent in receivables. You are required to calculate the most paying credit policy for the company and give your comments. 23.Ravi and Sons Co. Ltd, a manufacturing company having an extensive marketing network through out the country, sells its products through four zonal sales offices viz, Calcutta, Mumbai, Chennai and Delhi. The budgeted expenditure for the year is given below: Table no: 29 The following further particulars are also available: Rs. Rs. Sales Managers salary 120000 Expenses relating to Sales Mangers office 80000 Traveling Salesman’s salaries 320000 Traveling Expenses 36000 Advertisement 30000 Godown rent zone: Calcutta 15000 Mumbai 25200 Chennai 9800 Delhi 18000 68000 68000 Insurance on inventories 20000 Commission on sales @ 5 percent on sales 600000 191
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PROBLEMS FOR EXERCISE Table no: 30 a. based on the above details compute zone wise selling overheads as percentage to sales b. advise any suggestions to improve. 24.Market Division of Cable India Ltd. wishes to discontinue the sale of one of the products in view of unprofitable operations. Following details are available with regard to turnover, costs and activity for the year ended 31st March 2005. Products Table no: 31 Zone Sales in Rs. lacs No. of salesmen Total mileage covered Allocation of advertisement Avg stocks Rs. lacs Calcutta 36 5 6000 30 percent 6 Mumbai 48 6 14000 30 percent 8 Chennai 16 2 4500 20 percent 2 Delhi 20 3 5500 20 percent 2 A B C D Sales Turnover (Rs.) 600000 1000000 500000 900000 Cost of Sales (Rs.) 350000 800000 370000 180000 Storage Area (Sq. Meters) 40000 60000 70000 30000 No. of cartons Sold 200000 300000 150000 350000 No. of Bills Raised 100000 120000 80000 100000 192
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PROBLEMS FOR EXERCISE Overhead costs and Basis of Apportionment are: Table no: 32 Variable Costs: Table no: 33 Based on the above data you are required to a. Prepare statement showing summary of selling and distribution costs to the products b. Prepare Profit and Loss statements showing contribution and profit or loss on sales of each of the products to enable the marketing department take an appropriate decision on discontinuance of the sale of a product. c. Give your comments briefly. 25.Surya bulb manufacturer makes an average net profit of Rs. 2.50 per piece on a selling price of Rs. 14 by producing and selling 60000 pieces or 60 percent of the potential capacity. The cost of sales is Direct Material Rs. 3.50 Direct Wages Rs. 1.25 Works Overhead Rs. 6.25 (50 percent fixed) Sales overhead Rs. 0.80 (25 percent varying) Fixed Expenses: Rs. Administrative wages and salaries 100000 No.of bills raised Salesmen’s salaries and expenses 120000 Sales Turnover Rent and Insurance 60000 Storage area Depreciation 20000 No.of Cartons Commission 4 percent of Sales Packing Materials and wages Rs. 0.50 per cartons ( fifty paise) Stationery Rs. 0.20 per bill (twenty paise) 193
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PROBLEMS FOR EXERCISE During the current year, Surya intends to produce the same number but
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