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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

@Arslan khan @ Zeeshan Raza @Rosali please share some idea solution...

Rosali operating expenses income statement may jyn gay... Just Deprecation fixed cost hai 
or apko Rupees nikalne ki zrort nai just per kg price se question solve krein

sir vc 15+7+3+2=27 hogi am I right?

IDEA SOLUTION
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

tariq sahb ap ny depreciation ko consider nain kea.why?

rent + dep  are fixed cost ..... Misc fixed will go to operating expense

 ABDUL MoEeZ with due respect you seem wrong in considering Misc Fixed cost as operating.

Tariq sb copy paste kartay hain just aur logo se, khud se koi solution nahi hoti un ki

kisi ne complete banai ya fr koi nai.........

tariq sahb ny depreciation ko kun ignor kr dea ha?

Rosali Tariq sb logo ki solutions churaatay hain khud konsi koi solution hai un ki jo ap un se pooch rahi ho

Rosali operating expenses income statement may jyn gay...
or apko Rupees nikalne ki zrort nai just per kg price se question solve krein

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