Email: smu.assignment@gmail.com
Mob: +919741410271 / +918722788493
Q1) ABC Ltd.
Produces room coolers. The company is
considering whether it should continue to manufacture air circulating fans
itself or purchase them from outside.
Its annual requirement is 25000 units.
An outsider vendor is prepared to supply fans for Rs 285 each. In addition, ABC Ltd will have to incur costs
of Rs 1.50 per unit for freight and Rs 10,000 per year for quality inspection,
storing etc of the product.
In the most recent
year ABC Ltd. Produced 25000 fans at the following total cost:
Material Rs. 50,00,000
Labour Rs. 20,00,000
Supervision
& other indirect labour Rs.
2,00,000
Power
and Light Rs.
50,000
Depreciation Rs.
20,000
Factory
Rent Rs.
5,000
Supplies Rs.
75,000
Power
and light includes Rs 20,000 for general heating and lighting, which is an
allocation based on the light points.
Indirect labour is attributed mainly to the manufacturing of fans. About 75% of it can be dispensed with along
with direct labour if manufacturing is discontinued. However, the supervisor who receives annual
salary of Rs 75,000 will have to be retained.
The machines used for manufacturing fans which have a book value of Rs
3,00,000 can be sold for Rs 1,25,000 and the amount realized can be invested at
15% return. Factory rent is allocated on
the basis of area, and the company is not able to see an alternative use for
the space which would be released.
Should ABC Ltd. Manufacture the fans or buy them?
Q2) Usha
Company produces three consumer products: P, Q and R. The management of the
company wants to determine the most profitable mix. The cost accountant has supplied the
following data.
Usha
Company: Sales and Cost Data
|
Description
|
Product
|
Total
|
||
|
|
P
|
Q
|
R
|
|
|
Material
Cost per unit
|
|
|
|
|
|
Quantity (Kg)
|
1.0
|
1.2
|
1.4
|
|
|
Rate
per Kg (Rs)
|
50
|
50
|
50
|
|
|
Cost
per unit (Rs)
|
50
|
60
|
70
|
|
|
Labour
Cost per unit
|
30
|
90
|
90
|
|
|
Variable
Overheads per unit
|
15
|
10
|
25
|
|
|
Fixed
Overheads (Rs .000)
|
|
|
|
9,175
|
|
Current
Sales (Units ,000)
|
100
|
50
|
60
|
210
|
|
Projected
Sales (Units ,000)
|
109
|
55
|
125
|
289
|
|
Selling
Price per unit (Rs)
|
150
|
200
|
270
|
|
Raw
material used by the firm is in short supply and the firm can expect a maximum
supply of 350 lakh kg for next year. Is
the company’s projected sales mix most profitable or can it be changed for the
better?
Q3) DSQ Company
Ltd, a diversified company, has three divisions, cement, fertilizers and
textiles. The summary of the company’s
profit is given below:
(Rs/Crore)
|
|
Cement
|
Fertilizer
|
Textiles
|
Total
|
|
Sales
|
20.0
|
12.0
|
18.0
|
50.0
|
|
Less : Variable
Cost
|
8.0
|
9.6
|
5.4
|
23.0
|
|
Contribution
|
12.0
|
2.4
|
12.6
|
27.0
|
|
Less : Fixed
Cost (allocated to divisions in proportion to volumes of Sales)
|
8.0
|
4.8
|
7.2
|
20.0
|
|
Profit (Loss)
|
4.0
|
(2.4)
|
5.4
|
7.0
|
After allocating
the company’s fixed overheads to products the Fertilizers, division incurs a
loss of Rs 2.4 crore. Should the company
drop this division?
No comments:
Post a Comment