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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

Operating Expense treat hoga...

Rosali sis aap to mgt402 me bht fast hn.

2250 per  bag hai jab k 36 per kg ... so either do it per kg or per bag.. to aap ko 

ap ki variable cost 27 aye gi to ap ko

Per bag it would be  27 x 50kg=1350 per bag

Depreciation is also fixed cost...

MGT402 - Cost & Management Accounting Assignment No. 02 Due Date 11 Aug 2014

IDEA SOLUTION

ist part od assgnmnt
Break even point in units and value both for the current and next year. (3 Marks)
Contribution Margin = Fixed Cost + Profit
Fixed Costs = rent + Misc. fixed operating expenses
Fixed Costs = Rs. 18 Million+ Rs. 16 Million
Fixed Costs = Rs. 34 Million
Break even point in units = FC / P – V
Break even point in units = 34 Million / 2, 250 – 36
Break even point in units = 34 Million / 2, 214
Break even point in units = 15, 357 :thinkinng

Rent of the factory’s outlet for the year = Rs. 1.5 Million / month
Rent of the factory’s outlet for the year = 1.5 Million x 12 months
Rent of the factory’s outlet for the year = Rs.18 Million

ab depreciation kahan gai?

Dear Students Don’t wait for solution post your problems here and discuss ... after discussion a perfect solution will come in a result. So, Start it now, replies here give your comments according to your knowledge and understandings....

i think

Given Data:

Sales = 35, 000 bags x Rs.2, 250

Sales = Rs.78, 750, 000

The variable production and operating costs for the year:

  1. Purchase cost of sugarcane is Rs.15 per kg;

  2. Crushing process requires Rs.7 per kg;

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

  4. Sugar refinement costs Rs. 2 per kg; &

  5. Other variable operating expenses Rs. 9 per kg

So, the variable cost = 15+7+3+2+9

Variable Cost = Rs.36

Variable Cost = Rs. 36 x 35, 000 bags

Variable Cost = 12, 60, 000

Rent of the factory’s outlet for the year = Rs. 1.5 Million / month

Rent of the factory’s outlet for the year = 1.5 Million x 12 months

Rent of the factory’s outlet for the year = Rs.18 Million

Depreciation, plant and assets = Rs. 36.80 million per year

Fixed Cost = Rent + Depreciation

Fixed Cost = Rs. 18, 000, 000 + 36.80 Million

Fixed Cost =

Misc. fixed operating expenses = Rs. 16 Million

In Year 2014:

Demand /increment = 10%

Variable Cost Increment = 15%

yeh variable cos per kg mn hy to variable cost=36 *1.75 million kilogram then= 63 million. am i right?

jb k fixed itni zyada value bn rhi hy to variable may be 63 million

VARIABLE COST:

Variable Cost: 15 + 7 + 3 + 2 + 9 = 36

Variable Cost = Rs. 36/unit

Total Variable Cost = 36 X 35000 = 1,260,000

 

FIXED COST:

Rent of the Factory = 1.5m x 12 = 18m

Depreciation of the Assets = 36.8m

Fixed Operating Expense = 16m

Total Fixed Cost = 70.8m = 70,800,000

Selling Price per Unit: 2,250

(2013)

Total Units = 35,000

= 35,000 X 2,250

Total Sales (2013) = 78,750,000

(2014)

Total Units = 35,000 X 10% = 38,500

= 38,500 X 2,250

Total Sales (2014) = 86,625,000

 

 

 

Contribution Margin:

= Selling Price /Units – Variable Cost / Units

= 2250 – 36

= 2214

 

 

PLEASE CONFIRM IS THIS RIGHT OR NOT?????????????????

hi i think it is right.

welldone.

pr ap ny misc.fixed operating expense ko confirm kr k hi fixed cost mein add kea ha na?

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