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Cost Management-final                                                                                                       28

Profit  3,46,000

(b)Statement  for determining  revised price and the percentage of increase  in  the  price for 1999-2000 based on the views of Vice-President- Manufacturing

Rs.

Variable cost13,54,000

(20,000 units X Rs. 67.70)

Fixed  expenses8,00,000

Profit4,65,000

(Refer  working  note  4)

Desired  sales  revenue  26,19,000

Revised selling  price  (per unit)130.95

(Rs. 26,19,000/20,000 units)

                        Rs. 130.95  -- Rs. 125  

Percentage increase in selling price  :    X 100 = 4.76%

                                   Rs.  125

(c)  Evaluation  of  four alternative  proposals of

Vice-President – Marketing

 

Addition units of sales2,0004,0006,0008,000

Rs.Rs.Rs.Rs.



Total contribution1,14,6002,29,2003,43,8004,58,400

(Refer  to working note 3)( 2,000 units X( 4,000 units X (6,000 units X(8,000 units X

Rs. 57.30)Rs. 57.30)Rs. 57.30)Rs. 57.30)

Less: Advertisement  expenses80,0001,94,0003,20,0004,60,000



Addition Profit /(Loss)34,60035,20023,800(1,600)

------------

Evaluation of four alternatives : Since the additional profit is maximum at the additional sales of 4,000 units, therefore the second alternative is adjudged as the best out of the four alternatives proposed by the Vice-President of Marketing. Hence the concern should produce and sell 24,000 units during the year 2005-06  

Overall Income Statement for 2005-06



Output and sales24,000 units



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