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Case

 

Rehman Sugar Mills is well known for its refined sugar. In the year of 2013, it sold 35,000 bags containing 1.75 million kilograms of refined sugar at Rs. 2,250 each bag.

The variable production and operating costs for the year were;

a)   Purchase cost of sugarcane is Rs.15 per kg;

b)   Crushing process requires Rs.7 per kg;

c)   Boiling the pulp needs Rs. 3 per kg;

d)  Sugar refinement costs Rs. 2 per kg; &

e)   Other variable operating expenses Rs. 9 per kg

Rent of the factory’s outlet for the year was Rs. 1.5 million per month. Depreciation of the company’s plant and other assets was Rs. 36.80 million per year. Misc. fixed operating expenses were Rs.16 million for the year.

For year 2014, it is expected that the sale price will remain the same. But, the demand will be increased by 10%. Accordingly, the variable costs will also be increased by 15%.

Required:

1.   Break even point in units and value both for the current and next year.  (3 Marks)

2.   Income statements of both the years.                                                       (4.5 Marks)

3.   If the mills need to earn net profit of Rs. 350,000 in the year of 2014, how many bags it needs to sell.  (2.5 marks)

 

Important:

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Replies to This Discussion

Saida

Contribution Margin Per Unit CM per Unit=  Revenue per unit- Variable Cost per unit  2250-1800= 450CM per bag

Variable cost per unit in kg                           =15+7+3+2+9   =36 per Kg

Per bag it would be 36 x 50kg                       =1800 per bag

1750000 kg Sugar in 35000 bags                                

Sugar in each bag                                             =1750000/35000

=50 kg

2250 per bag price where as  36 per kg... u cant minus it ...

Contribution Margin Per Unit
CM per Unit=  Revenue per unit- Variable Cost per unit 
2250-1800= 450CM per bag

thnx

Dear Frns, Dep is liye consider ni ho gi, q k Dep method mention ni ha,

method ki zaroorat b nai jab already calculated dep di gai hai

i think

u r ryt.........................

Nice work Wafa Ghazal, except the 2014 total sales, it should have been 110% rather than only 10%. or alternatively you have to write in the following fashion:
total sale units = 35,000 x 10% + 35000 or 35,000 x 110%

okay iska kiya kerna hia 2014 ki k liye variable cost doobara calculate karain???

Accordingly, the variable costs will also be increased by 15%.

Obviously...

the pattern would be the same as you followed for increased demand...

Plzzz full solution upload kr dy ...................

plz upload solution

plzz upload solution

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