anticipates that the fixed charges will go up by 10 percent while rates of

# Anticipates that the fixed charges will go up by 10

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anticipates that the fixed charges will go up by 10 percent while rates of direct labor and direct material will increase by 8percent and 6percent respectively. But he has no option of increasing the selling price.Under this situation he obtained an offer for a further 20 percent of his capacity. What minimum price will you recommend for acceptance to ensure the manufacturer an overall profit of Rs. 167300.00. Reason out your recommendation? 26.ABC Garment Ltd. manufactures readymade garments and sells them on credit basis through a network of dealers. Its present sale is Rs. 120 lacs. per annum with 20 days credit period. The company is contemplating an increase in the credit period with a view to increasing sales. Present variable costs are 70 percent of sales and the total fixed costs Rs. 16 lacs per annum. The company expects pre tax return on investment @25 percent. Some other details given as under: Table no: 34 Required: a. Which credit policy should the company adopt? b. Present your answer in tabular forms c. Assume 360 days a year d. Calculations should be made up to two digits after decimal. 27.ABC Agra presently operates its plant at 80 percent of the normal capacity to manufacture a product only to meet the demand of Govt. of Himachal Pradesh under a rate contract. He supplies the product for Rs. 400000/- and earns a profit margin of 20 percent on sales realizations. Proposed Credit Policy Average collection (period – days) Expected annual sales ( Rs. In lacs) A 30 130 B 40 140 C 50 148 D 60 150 194
PROBLEMS FOR EXERCISE Direct cost per unit is constant. The indirect costs as per his budget projections are: Table no: 35 He has received an export order for the product equal to 20 percent of its present operations. Additional packing charges on this order will be Rs. 1000/- Arrive at the price to be quoted for the export order to give him a profit margin of 10 percent on the export price. Give your comments. 28.The cost structure of a product is Direct Material Rs. 12 Direct Labor Rs. 4 Variable Overheads Rs. 8 Fixed Overhead Rs. 10, 20,000 Sales 1,00,000 units per annum. The capital employed in fixed assets is 24 lacs and in current assets is 50 percent of sales. Determine the selling price per unit to earn 20 percent on capital employed. 29.Kalyan manufacturing company is making a relative profitability of two products A and B. In addition to direct costs, indirect selling and distribution costs are to be allocated between the two products. Indirect Costs 20000 units (80 percent capacity) Rs. 22500 units (90 percent capacity) Rs. 25000 units (100 percent capacity) Rs. Variable 80000 90000 100000 Semi variable 40000 42500 45000 Fixed 80000 80000 80000 195
PROBLEMS FOR EXERCISE Table no: 36 Other details are: Table no: 37 Storage space occupied for A is 10 and for B is 4 (i.e., 10 : 4). Insurance charges are to be allocated on the basis of total average inventory value. The cost to pack and forward one unit is the same for both the products.

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• Spring '18
• Sunitha Ratan

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