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Topic:                       Breakeven Point

 

Learning Objectives:

The students will learn through this GDB the basic mechanism of break-even analysis in small businesses working in surrounding of their daily life.


   Learning Outcomes:

After going through this GDB, the learners are expected to apply their knowledge through break-even model to solve cost profit volume issues in their surroundings - especially in small business at sole proprietor level.

 

“Discussion Question”

 

Mr. Santa - a poor young man has grown up in the vicious state of poverty. These days, he has a small family containing his 2 kids and a wife. Being an uneducated man, he has no respectable livelihood for himself and his poor family. Recently, he has come to know that the local government has announced a plan to provide small interest-free loans to the people of his community.

 

Last week, he consulted this announcement with one of his close friend - Mr. Banta, who is running a small barber shop near his own house. Banta gave him an advice to apply for the loan to start a small juice corner in a rented shop located near a large populated community boy’s school. Santa seriously started thinking over the advice and with the help of his neighbor – Mr. Educated; he applied for a loan with the local government. To his luck, he has been provided a loan worth Rs. 50,000 for a period of three years payable in equal monthly installments.

 

Using this borrowed money, his friends - Banta and Educated chalked out a business plan for Santa bearing the following features:
                                                                                                           Rs.

Estimated purchase price of a Sugarcane Juice Extractor          80,000

along with a Generator having 5 years useful life

 Other Monthly expenses:

Rent of the shop                                                            5,000

Monthly electricity bill                                                    1,500

Advertising expenses                                                      1,000

Wages to helper                                                             3,000

Administration expenses                                                    500

 

Banta again helped Santa and approached one of his fast friends – Mr. Mechanic and got the same but used machinery (with the similar expected useful life) for a total of Rs. 60,000 payable in two equal installments; each to be paid by the end of third month.

 

These people estimated that Santa can easily get sugarcane sticks from a local fruit whole seller – Mr. Aarhtee at Rs. 5 per stick for a foreseeable period. Each stick of sugarcane will produce 500 ml of sugarcane juice. Additional costs of using ice, lemon and salt has been estimated at Rs. 1 per each 250 ml juice produced. 

 

It was decided that to attract the market, Santa will sell the sugarcane juice in three packing’s – small glass of 250 ml, large glass of 500 ml, and a family jug of 1,000 ml. Santa was agreed to sell the juice at a sale price of Rs. 5 per each 250ml.

 

Although things were very clear to Santa, yet, he was unable to determine the minimum quantity to sell in order to avoid any financial loss. He was more worried as he has to repay the monthly installments along with feeding his small family.


Requirement

 

By considering the above information you are required to answer the following:

 

1.         How many sticks of sugarcane should be used by Mr. Santa during any month to covers its all fixed expenses?

 

2.         How many “family jugs” should be sold out by Mr. Santa to cover up the monthly fixed cost?

 

 

3.         What should be the total sales amount through which Mr. Santa can earn the profit of Rs. 12,000 for a given month?

 

4.         Once a representative of an insurance company – Mr. Agent visited his shop and offered him to purchase an insurance policy from his company for avoiding any uncertainty at monthly premium of Rs. 3,000. By doing so Santa’s monthly cost has been increased. You are required to mention the number of large glasses that should be sold out by Mr. Santa to cover all of his expenses including the insurance cost.

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Replies to This Discussion

kisi student ko bhi yeh right nahi keh wo kisi student k baaray mein ghalt biyaani karay.. jitni dair say aap ghalt biyaani ker rahay hain utni dair mein yeh handsout open ker parh letay to 75% tak yeh gdb solve ker chukay hotay wo bhi apni mehnat say... plss demotivate na keya karain kisi ko bhi 

kashif bro aap baki b answer de to to most welcome hmry pas time hota to vu mn e aaty?

yeh idea bhi hay aur 1st three tak ki calculation bhi ... 

plz word p send ker dn

ye ni open ho ra

dear bro...

 samaj nehe  ha rha

dear all

   plz upload the complete solution time is wasting  aur  shumila ka issray mat rehna

rizwan shb app teek khty ho sumaila dy lary munday parnay vi kavary

plz koi world me upload ker dy yeh opn ni hota

Yeh GDB mein post karnay k baad to mere answer ki shakle hi badal gaee hai ...:( pata nahi ab in ko samjh bhi aani hay ..kyun k saara kaam to calculation ka tha ... mein keya karoon ? :(

ghussa aa raha hay mujhay ....... itni time lagaaya aur yeh kya shakle ikhtiyaar ker gayaa..hunhhhh

1.         How many sticks of sugarcane should be used by Mr. Santa during any month to covers its all fixed expenses?

 

 

Machinery ( 60,000/5 = 12000/12 = 1000

1000

Rent for shop

5000

Monthly electricity bill

1500

Advertising expenses

1000

Wages  To helper

3000

Administration Expenses

500

Fix Cost

         12,000

 

 

 

 

Stick for Sugarcane 250ml ( 12000/5)

2400

Stick for Sugarcane 500ml (12000/10)

1200

 

Family Jug sold ( 12000/20)

600

2.         How many “family jugs” should be sold out by Mr. Santa to cover up the monthly fixed cost?

3.         What should be the total sales amount through which Mr. Santa can earn the profit of Rs. 12,000 for a given month?

 

 

Fix Cost

12000

Profit

12000

 

                                                                24,000

Ratio (10/20)

50%

Total Sale (24,000/50%)

48000

 

thanks kashif

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